Zurich: Swiss Re added another $500 million in reserves for future claims as it warned about the high uncertainty that remains because of the pandemic. The reinsurer reported a net loss of $691 million for the first nine months, driven by the higher reserves, as the virus bounces back and the threat of more lockdowns rises.
Excluding the impact of COVID-19 related claims and related reserves, the firm said it would have had profit of $1.6 billion. The uncertainty around the pandemic remains high and could impact the evolution of claims in the coming quarters, affecting Swiss Re's projections for losses, the company said.
The pandemic and a near-record Atlantic hurricane season have caused insurance claims to soar globally while the economic impact from the virus also hurts earnings from investments. While Swiss Re had already set aside $2.5 billion for the first-half of the year to cover the majority of the expected ultimate losses from the pandemic, the total amount of claims remains difficult to predict.
No end to the bad news
"We continue to be focused simultaneously on managing all dimensions of the COVID-19 crisis, " Chief Financial Officer John Dacey said. "We are strongly positioned to capture attractive opportunities in upcoming renewals and deliver on our financial targets."
At the firm's key property and casualty business, the combined ratio rose to 110.3 per cent, from 101.4 per cent a year earlier. A ratio of more than 100 per cent means claims and expenses exceed revenue from premiums. Excluding effects of the virus, the ratio would have been 100.1 per cent, the company said. The division took $1.6 billion in reserves due to virus-related claims in the nine-month period.
Hurricanes Laura and Sally, the US West Coast wildfires, and floods in Asia contributed to natural catastrophe losses, while the Beirut explosion contributed to man-made losses for a combined $1.5 billion loss to the unit.
The world's second-largest reinsurer said in September that the price for policies it provides through all of its divisions will increase as more exposure to disasters such as hurricanes drives demand for coverage. Swiss Re said it experienced improved market conditions and demand for large transactions in its reinsurance divisions in the third quarter.
Excluding COVID-19 losses, the corporate solutions unit, which offers primary insurance for companies, would have swung to profit of $211 million in the first nine-months of the year, from a loss of $441 million a year ago. The unit has been undergoing a restructuring. After exiting some of its unprofitable portfolios, the combined ratio remains elevated at 118.7 per cent from 127 per cent a year ago.
The unit reserved $678 million for virus-related claims for the first nine months. The majority of claims are related to event cancellations, a line of business which Swiss Re exited in 2019.