The lifting of lockdown restrictions unleashed a "big tsunami" of motor and homeowners' insurance claims in Mapfre SA's home market of Spain, according to CFO Fernando Mata Verdejo, and a similar trend should be expected in some of the insurer's other markets.
Speaking to analysts about Mapfre's first-half earnings, Mata said the insurer experienced a 50% increase in homeowners' and condominium claims in June after an otherwise quiet second quarter.
"Once the lockdown measures were lifted, we started catching up. It was a big backlog of claims," he said. "We should expect a similar trend in the U.S ... and the same in Latin America."
He also said that across the last week in June and the first week in July, Spain's traffic agency reported a 22% increase in road traffic deaths.
Mapfre booked additional incurred but not reported, or IBNR, claims reserves for nonlife business in the first half equivalent to 2.7 percentage points of the group's loss ratio. Mata said the main reason for the additional IBNR reserving was to "try to cover delay in the way policyholders are reporting claims."
Mapfre reported a 27.7% drop in first-half profit to €270.7 million from €374.5 million in the first half of 2019. The reduction was partly as a result of €153 million in reported coronavirus-related claims. Of this amount €66.9 million fell on Mapfre's insurance businesses, while the remaining €86.5 million was picked up by the reinsurance and global risks unit.
However, the company said the overall coronavirus impact on the insurance business was "neutral" because the claims, other related expenses and a reduction in premium volume were offset by a cut in claims frequency, particularly in motor insurance.
Mata acknowledged the "extremely wide" variation in results by division, noting that some smaller entities in the group had produced "astounding results." He added that this was "not sustainable in the future," but neither were the negative hits to the reinsurance and global risks segment.
"What we should expect is both negative and positive to converge into standard metrics," he said.
Business interruption dominates
Mata said the total hit to Mapfre Re from coronavirus claims in the half was €80.9 million, of which €70.9 million was for property claims. These were exclusively related to specific business interruption covers, Mata said.
The remaining €10 million was reserves for credit insurance. Although the number of credit insurance claims received to date is "very small," Mata said most of the amount was booked as a reserve because "an uptick in claims is expected for the coming quarters."
Mata said the company had not received any event cancellation claims because "we do not underwrite this line of business." He added: "Nor do we have exposure to casualty or workers compensation in the U.S., and the impact in the life business has been pretty immaterial so far."
While he was upbeat about Mapfre's ability to weather the coronavirus crisis, Mata said there was a "high level of uncertainty" in the claims the company would face from the pandemic, because of the possibility that courts could find in favor of policyholders in claims disputes, the possibility of losing arbitration processes with clients and the potential for further claims from fresh outbreaks.