Frankfurt: Munich Re has stopped selling coverage to protect against business losses in future pandemics after the German reinsurer took a 1.5 billion euro ($1.8 billion) virus-related hit in the first-half.
"We are currently examining whether we will offer new contracts that include pandemic protection in property and casualty insurance in the future," Torsten Jeworrek, Munich Re's head of reinsurance, said. "For the moment it has been suspended, for example with respect to event cancellations."
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The company will continue to cover pandemics in its life and health contracts. Most of Munich Re's COVID-19-related losses this year stemmed from the scrapping of major events and other hits to companies' income during lockdown.
The reinsurer issued a profit warning in March and halted a share-buyback programme, citing a surge in claims related to the outbreak. It hasn't issued new profit guidance for 2020.
Make provisions - but how much?
Insurers and reinsurers are trying to contain the damage from the pandemic by setting aside enough money to cover future claims even though there's a high level of uncertainty about what the final cost will be. Lloyd's of London estimated in May that the insurance industry will suffer about $203 billion in losses related to coronavirus this year, with about $107 billion coming from underwriting claims and the rest from investment portfolios.
Jeworrek said he's cautious about estimating potential losses in the second-half given uncertainty about what will happen in the autumn. "We could be running into a critical time again, for example if there are new lockdowns," he said.
$203billionLosses that the global insurance sector could suffer from pandemic related cover.
He's more optimistic about next year. "We will probably work through the majority of COVID-19 losses this year," Jeworrek said. "This is also due to the fact that the insurance contracts concerned usually have a term of one year, and we are currently not issuing any additional pandemic coverage. So that should run out."
Looking ahead, Munich Re supports the creation of government-backed insurance funds to help shield companies against losses during future pandemics, Jeworrek said. Lloyd's has led the industry call for such funds and new types of insurance policies to protect against public health emergencies and global threats.