COVID: The Serial Killer
Denis Kessler warns that the global pandemic will have a huge impact on the market.
By Marc Jones, Associate Editor
The COVID-19 lockdowns might be easing somewhat, but according to Denis Kessler, Chairman and CEO at SCOR, the coronavirus' impact is still far from over.
“It’s a global shock like no other,” he stresses. “When you read that isolated Amazonian tribes are being affected by COVID-19, then you know that it’s a truly global crisis. Furthermore, it unfolds over time – dying out in some places while emerging or even starting up again in others. The pandemic is the perfect example of a serial risk, unrestricted by space or time. The virus is indeed a true "serial killer."
“The pandemic is still ongoing. The costs that have been booked by insurers and reinsurers globally are already in the tens of billions of dollars. The number will most likely continue to rise for the industry as a whole. There is no doubt that the economic cost linked to the pandemic will far outweigh the insured cost.”
For Kessler, the biggest surprise of the crisis is perhaps the fact that the COVID-19 pandemic looks set to be much more of a P&C event than a Life event in terms of the sums involved. According to him this is mainly due to trade-offs made by public authorities, which have prioritised public health above the economy.
“This historic health crisis has accelerated trends that were already at work but are becoming increasingly clear, the most prominent being the strong increase in risk aversion within our societies, in both industrialised and emerging economies. Undeniably, the value of human life is rising at a rapid rate, while suffering is increasingly rejected. Higher risk aversion leads to a greater propensity to protect human assets, both qualitatively and quantitatively. As the value of life goes up, more and more people seek insurance protection, all else being equal.”
According to Kessler, greater aversion to risk, along with a combination of factors such as the impact of COVID-19, social inflation, and the persistent low yield environment after three consecutive years of natural catastrophes and major industrial and commercial losses, are now accelerating market hardening on the P&C side. “All these elements are paving the way for the cycle to turn,” says Kessler. He adds: “The (re)insurance industry is already thoroughly revising the terms and conditions of each treaty and each contract.”
“The main driver is COVID-19,” he says, “combined with a number of different catalysts. With each renewal this year, we’ve seen the market firming up and we are confident that next year will see a high upturn in rates. The consensus in the industry is heading in that direction.”
Kessler’s comments came as executives from the re/insurance industry would normally have been attending the Monte Carlo Rendez-Vous, which was cancelled this year because of the pandemic, prompting speculation on if the event is needed after the industry turned to online meetings instead.
However, Kessler stressed that the market needs the Monte Carlo Rendez-Vous, as there is no other place in the world where so many people from the (re)insurance industry voluntarily come to meet up and discuss market developments. “I often arrive on the Friday before the event,” he said, “and by Monday I already have an excellent idea of exactly where the market stands and in which direction it’s heading.”
