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Europe's top reinsurers more optimistic on COVID-19 claims as pace slows in Q3

The top four European reinsurers are sounding more upbeat notes about their ultimate coronavirus exposures, though they do expect more claims, after making a smaller addition to their collective bill in the third quarter.

Munich Re, Swiss Re AG, Hannover Re and SCOR SE added a combined €1.44 billion to their tally of coronavirus claims and reserves in the quarter, taking the year-to-date total to €6.31 billion. This was far smaller than the €3.46 billion they added in the second quarter, and roughly in line with the €1.45 billion they booked in the first three months of the year. Munich Re was the only one of the four to add more in the third quarter than in the second, upping its bill by €800 million. Swiss Re added a further $428 million in the third quarter after booking just over $2 billion in the second.

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Unlike its three peers, Swiss Re's total includes $678 million for its Swiss Re Corporate Solutions Ltd. large commercial insurance arm. Munich Re CFO Christoph Jurecka at a Nov. 5 press conference said coronavirus claims for the company's primary insurance operation, ERGO Group AG, were "insignificant from a group perspective."

More to come

The final pandemic claims picture for the big four reinsurers remains unclear. The bulk of property and casualty reinsurance bill continues to be reserves for incurred but not reported claims. And with continuing loss of life, lockdowns and coverage court battles, the nine-month figure is unlikely to be the final tally.

"I would like for it to be over but it's not, and in future quarters we expect that we will have some continuation of losses," John Dacey, CFO of Swiss Re, said at an Oct. 30 press conference.

Munich Re's Jurecka said that given the second wave of lockdowns in several countries, it is "pretty clear" that more events would be cancelled and it was impossible to rule out more claims for business interruption. He also said that if government programs supporting businesses were not renewed and there were further lockdowns in 2021, credit insurance would be "much more affected."

Some reinsurers also expect further life claims. Hannover Re has booked life and health claims and reserves of €160 million across the second and third quarters of 2020, of which more than two-thirds stemmed from the U.S., according to Klaus Miller, the reinsurer's executive board member with responsibility for life and health reinsurance. Miller told analysts Nov. 4 that in the U.S. Hannover Re was expecting claims "of the same magnitude as we have seen in the last two quarters" in the first and second quarters of 2021.

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Greater certainty

Though the pandemic continues, there are signs that the total claims picture is becoming more clear. Jean-Jacques Henchoz, CEO of Hannover Re, said that while the full impact of the pandemic was still unclear, there is "more solidity in the numbers." He said that both reinsurance and primary insurance wordings would be changing to exclude pandemics at the next renewal season, which will stand to reduce exposure "quite significantly."

Because of the exclusions being introduced, future exposure to COVID-19 business interruption claims will be "very minimal" for Scor SE, said Jean-Paul Conoscente, CEO of the company's P&C business. For credit and surety business, Conoscente said primary insurers had implemented "massive" price increases and reduced coverage limits "dramatically." Also, government aid schemes had given insurers headroom to take underwriting actions.

"We feel pretty confident that our ultimate estimates as they stand today are valid for now and also in 2021," he said.