These days, global reinsurance companies have started paying major share for catastrophic claims regularly globally that consists of end risks. This means covering an event that has a very limited chance of occurring but if it does can create great damage. For instance, September 11 terrorist attack, Hurricane Katrina and the latest COVID- 19 pandemic.
Over the period of the past decade, reinsurers have been witnessing average payouts of approximately USD 110 billion annually. However, were the reinsurance companies ready for this COVID-19 disruption that was declared as pandemic by WHO on 11th March?
Alike insurance companies, reinsurance companies have also started estimating their exposure to probable COVID-19 destruction costs. Some of the key factors been considered by the reinsurers include:
(a) Whether the loss is falling under the terms and conditions of the primary insurance policy;
(b) Whether the loss payment of cedent was made on an ex gratia basis;
(c) Understanding the line of business affected during the loss to meet statutory set of policies;
(d) In case the contract for reinsurance permits for aggregation of COVID-19 losses as single incidence;
(e)And is there too much COVID-19 concentration available with the reinsurer
Furthermore, currently, reinsurance companies are also struggling with certain issues similar to any other company that includes upholding their workforce that is either working onsite or remotely along with making certain that if the reinsurance is also considered as an essential business under myriad state business orders for closure. On the other hand, all the current issues being faced by the insurance companies, either on life, health, business or property will be examined only after receiving the claim keeping the aforementioned considerations in view. This is mainly owing to a factor that the reinsurance industry is a mode of backstop or credit support for the insurance industry. And it is important for the players in the industry to keep up with their operations that will enable them in addressing the claims as received. This will further be followed by offering assistance to their cedents in assessing the numerous insurance issues coming up due to the COVID19 pandemic.
Additionally, COVID-19 pandemic is catastrophic that is unlike other disasters been faced by the reinsurance industry in the past. Undoubtedly, the players across the reinsurance industry will react appropriately as the situation reaches them. But, that response will probably be reliable with the words of reinsurance contract & proportionate to the premium paid for reinsurance. Although reinsurance is the financial backstop for the insurance industry, it isn’t a backstop for the entire country.
Aware of her elements, Neha writes the best articles across industries including electronics & semiconductors, automotive & transportation and food & beverages. Being from the finance background she has the ability to understand the dynamics of every industry and analyze the news updates to form insightful articles. Neha is an energetic person interested in music, travel, and entertainment. Since past 5 years, she written extensively on sectors like technology, finance and healthcare.
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