Pandemic Will Delay US Commercial Insurers' Premium Hike Benefits

Any benefits US commercial insurers realize from sharp premium increases will likely be delayed by the impact of the COVID-19 pandemic and related economic fallout on underwriting results, according to Fitch Ratings.

"The pandemic has introduced considerable uncertainty for near-term underwriting performance that is expected to extend into 2021," Fitch said.

According to the rating agency, the largest initial effect of the COVID-19 pandemic on property-casualty insurers was from unrealized losses on equity investments amid a sudden sharp market decline. Industry statutory surplus fell by nearly 10 percent in the first quarter from its record 2019 levels, Fitch said. "Although markets remain volatile, surplus will recover a material portion of this reduction based on second-quarter market improvement," Fitch said.

Thus far, North American publicly traded insurers and reinsurers tracked by Fitch have reported an estimated $2.2 billion in pandemic-related losses, according to the rating agency.

To date, North American publicly traded (re)insurers tracked by Fitch have reported an estimated $2.2 billion in pandemic-related losses. Meanwhile, loss estimates from Lloyd's of London and large multinational insurers and reinsurers put global reported losses up at $11 billion to $13 billion.

Fitch said that while those figures are expected to rise substantially with second-quarter earnings results and over subsequent quarters, the losses still represent more of an earnings event rather than a sharp reduction in capital adequacy.

Specialized insurance segments such as travel accident, trade credit, and trip and event cancellation have seen significant initial reported claims losses, Fitch said. In addition, pandemic-related incurred losses may prove substantial in a number of other segments, including business interruption, workers compensation, and professional liability lines. The magnitude of losses will depend on the event's severity and duration, Fitch said, as well as regulatory, legislative, and judicial outcomes.