The fact is that coronavirus threatens the world with recession. Many insurance contracts include coverage from economic problems. For example, such policies include international transport insurance, airline insurance, and all trade contracts.
Moody's expects the growing demands to hit three largest trade credit insurers Atradius, Coface and Euler Hermes. The rating agency cited Atradius and Coface data showing that for each of them, nearly 15% of the potential risk fell on Asia and Australia, the two most affected regions.
Travel restrictions to such countries as Italy and Israel will lead to further insurance payments to tour operators and hoteliers, just as abandonment of major events will add claims to the sector.
The market participants are concerned with pressure on the insurance sector investment portfolio. The companies are currently managing total of $20 trillion. Analysts note that the yield on 10-year US Treasury bonds has fallen by half since the end of 2019. At least half of the managed assets of insurers are invested in these securities.
“The observed market changes give insurers an opportunity to reflect on their market risk models,” said Colin Tipping, head of investment management at Mercer.
Insurers, as a rule, are long-term investors who do not make hasty decisions, but the next few weeks will be a severe test for the entire market.
“If the economic situation worsens, they will certainly review portfolios and risks,” predicted Ferdia Byrne, KPMG insurance partner.
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