Improved Pricing Sees $6B Raised by Reinsurers Across Q4: Willis Re

A new report from Willis Re, the reinsurance arm of global brokerage Willis Towers Watson, estimates that reinsurers globally have raised $6 billion across the fourth quarter of 2020.

Source: Reinsurance News | Published on December 14, 2020

Property/Casualty insurance
P&C underwriting performance improves except Person Lines

This figure would bring the year-to-date total to $19 billion, with a further $3b being contemplated and/or in progress.

Willis Re attributes these capital raises to a strengthening pricing environment, particularly for reinsurance and commercial insurance lines of business.

Required balance sheet bolstering due to COVID-19 loss exposure also continued during the quarter.

Looking ahead, Willis Re expects to see further required capital raises as pending legal rulings on COVID-19 related claims are reached.

In terms of losses, the global re/insurers which Willis Re tracks booked $20 billion of COVID-19 related losses in the first nine months of 2020.

This remains considerably below the $68 billion mid-point of top-down loss estimates for the global non-life industry.

However, analysts note how this figure will rise with Q4 results; for example Munich Re announced on 1 December that it will book an additional €1.1 billion.

A number of re/insurers have reportedly included a significant incurred but not reported (IBNR) component in their booked losses due to considerable uncertainty around ultimate COVID-19 losses.

Willis Re says this uncertainty is due in part to pending legal rulings, particularly in relation to business interruption (BI) covers, which will decide if and how COVID-19 related claims should be covered.

One notable recent ruling was that taken by the Supreme Court of New South Wales on 18 November which determined that COVID-19 related BI claims should not be excluded under certain policy wordings.

This prompted IAG to advise that it will recognise an AUD865 million after-tax provision and launch a capital raise of up to AUD750 million.

Willis Re says the likelihood of significant COVID-19 losses arising from future underwriting years has now been reduced by the introduction of exclusionary policy wording by re/insurers.