The Group adopted early and strict prevention measures to protect the health of its employees and has been active in regularly sharing its knowledge and expertise on the pandemic. Thanks to the resilience of its operational capability, the Group has been able to continuously serve its clients during this crisis.
SCOR has applied its modeling expertise to conduct a thorough assessment of its exposures to the health, economic and financial impact of the Covid-19 pandemic. Based on data currently available, information received from cedants to date and the results of the models used, the total estimated cost of the Covid-19 pandemic booked in Q2 2020 reaches EUR 248 million on the P&C side, EUR 194 million on the Life side and EUR 14 million on the investment side, i.e. a total estimated cost of EUR 456 million net of retrocession, net of reinstatement premiums and before tax, fully booked in the second quarter. The situation is as follows:
On the P&C side, the Group’s exposure comes mainly from Credit, Surety & Political risks and from Property Business Interruption. The actual Covid-19-related claims received are limited, standing at a total of EUR 74 million. The Group has estimated the “ultimate” cost of this pandemic at EUR 248 million, net of retrocession and reinstatement premium, and before tax. It is this estimated amount that has been fully booked in the Q2 accounts.
Regarding Credit, Surety and Political Risks, limited cedant and insured information has been received to date, and the assessment is based upon models calibrated for forecasts of the impact of Covid-19 on growth and for the extensive intervention measures from governments and central banks. This estimate will be refined during H2 2020.
Regarding Property Business Interruption, SCOR has estimated that its exposures relate to a very small amount of affirmative pandemic coverage and non-damage Business Interruption, mostly in Western Europe, with non-damage Business Interruption scarce in the U.S. and largely sub-limited in APAC. Uncertainty in terms of estimating the cost of this business interruption arises from aggregation for this very small amount of affirmative coverage. Confirmation of these estimates will have to wait until H2 2020.
SCOR Global P&C has very limited Covid-19-related exposure to other P&C business lines. On casualty lines, there is very limited exposure to Directors & Officers (D&O), General Liability (GL) and medical malpractice lines, and no exposure to standalone workers compensation. SCOR has no exposure to event cancellation, postponement or relocation on a standalone basis, and very limited exposure from multi-line treaties.
On the Life side, the actual Covid-19-related claims received as at June 30, 2020 are limited, standing at a total of EUR 63 million. SCOR has estimated its exposure to the pandemic at June 30, 2020. The Group estimates the impact of the Covid-19 pandemic on its Protection book at EUR 194 million (net of retrocession and before tax). It is this estimated amount that has been fully booked in the Q2 accounts.
The main exposure arises in the United States. SCOR has booked a claim reserve provision of EUR 182 million (net of retrocession and before tax) to cover Covid-19 related claims, incurred in the United States up to June 30, 2020. The Covid-19 impact on the SCOR Global Life U.S. book reflects strong differences between the U.S. general population and the population reinsured by SCOR Global Life. The impact on the population reinsured by the Group is significantly lower than observed for the general population, due to healthier lives related to the underwriting selection process, higher socio-economic groups which benefit from better healthcare and better ability to adhere to containment measures, and a lower proportion of older lives. Estimated impacts rely heavily on expert judgment as each month of claims takes on average 6 calendar months to be fully reported.
A further EUR 12 million of Covid-19-related claims have been booked in Europe and Asia Pacific in Q2 2020.
The evolution of the Covid-19 pandemic is still subject to a high level of uncertainty. SCOR monitors the situation continually thanks to a detailed proprietary epidemiological model. At this point the pandemic is estimated to have a manageable impact on SCOR Global Life’s portfolio over the next 12 months. The ultimate outcome of the pandemic is still subject to significant variation, due to compliance with containment measures in the U.S., the progress in medical treatments, and potential viral mutations.
On the investment side, SCOR benefited from the defensive nature and very high quality of its investment portfolio when the Covid-19 pandemic started. The level of impairment charge remains limited in Q2 2020 at EUR 14 million before tax. The level of unrealized gains has increased by EUR 172 million between December 31, 2019 and June 30, 2020, despite EUR 62 million of realized gains largely coming from the real estate portfolio in Q1 2020.
The recent affirmations from Moody’s, Fitch and S&P regarding SCOR’s rating position, its solvency position well within the optimal 185% to 220% range and its ability to grow in the current crisis, highlight the Group’s financial strength and the resilience of its global franchise. SCOR considers the Covid-19 pandemic to be a fully manageable earnings event for the Group, impacting its annual results without eroding its capital position.