Citi presents an article concerning the COVID-19 pandemic impact on the insurance industry. The article explains that experts in the global insurance market are still discussing quarantine implications, and next to that, are also seeking ways to strengthen the industry in case of future perturbations. This means that the insurance industry creates conditions to establish even stronger risk partnership with the customers and act as a risk consultant, not only issuing receipts once an insured event occurred.
The Roscongress Foundation presents the salient points of the publication accompanied by fragments of broadcasts of relevant panel discussions from the business programme of international events held by the Roscongress Foundation.
The COVID-19 pandemic has caused erosion of credibility of insurance products. According to estimates, the indemnification amount due to the COVID-19 may exceed costs paid out after the Hurricane Katrina in 2005. However, the majority of insurance companies are able to fulfil their obligations.
General Director at Lloyds, one of the most popular world insurance markets, has predicted that indemnification caused by the COVID-19 is likely to be the biggest-ever in the insurance history, and significantly exceed a threshold of 50 billion dollars after the Hurricane Katrina in 2005. Nevertheless, the crisis caused by coronavirus pandemic is unlikely to exceed reserves of the insurance companies, but will also bring certain challenges to the entrepreneurs.
However, the article states that even if losses exceed a threshold of 100 billion dollars, the majority of insurance companies will be able to fulfil their payment obligations.
The pandemic will cause structural changes in cooperation of the insurance companies with their customers during large-scale negative events, similar to coronavirus outbreak.
It is obvious that experts will continue estimating losses of the insurance industry after the COVID-19 pandemic, and such are most likely to be tremendous. The authors distinguish economic recession, stock exchange recession, insurance portfolio depreciation and solvency margin reduction among the other negative factors.
The most material changes may also occur in structure of relations between the insurance companies and their customers. If before the pandemic, the insurance industry was mostly offering products to cover property assets providing for indemnification on legal issues and compensation of some operational expenditures, frequently associated with a small number of causes or «threats», then nowadays the insurance companies will have to establish stronger cooperation with their customers and act as qualified risk consultants.
Currently, plans of pandemic insurance reviewed at the government level in the certain states, will motivate the insurance companies to develop products offering solutions to key issues of small and medium enterprises, provide coverage against disruptions and lost profits, and wide range of factors that sometimes cannot be traced up to the legal reasons.
As in many other economic sectors, the COVID-19 will serve as a catalyst to accelerate current trends and establish new ones, especially, for the insurance companies who are ready to accept them.
For more information about construction as a sector with a sizeable share in many economies, rising level of digitalization, and shifts in consumer sentiment in real estate, please see the COVID-19, StayHomeEconomy, Financial market and Insurance.