GC Capital Ideas Top Stories: August 2020
1. Silent Cyber – No Longer Silent: Silent (or non-affirmative) cyber refers to cyber-related exposure within many all-risk general insurance products. If no explicit cyber exclusion applies, coverage for losses caused by cyber perils may apply. This underlying exposure’s potential for aggregated loss is currently one of the major issues being considered by the (re)insurance industry.
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2. Mid-Year 2020 Reinsurance Renewal – Capital: A preliminary estimate calculated by Guy Carpenter and A.M. Best indicates that total dedicated reinsurance capital was resilient at the end of the first half of 2020, recording a marginal increase of 1 percent overall from year-end 2019. Recovering financial markets and asset valuations during the second quarter of 2020 have helped shore up the traditional component of the sector’s capital base, which was up 1 percent at June 30, 2020.
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3. Mid-Year 2020 Reinsurance Renewal – Losses: Loss activity through the first half of 2020 was dominated by COVID-19. There is considerable uncertainty embedded in each COVID-19 loss estimate released to date. The current average of all reported ranges is ~USD 60 billion.
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4. Standard & Poor’s Outlook on COVID-19: Standard & Poor’s (S&P) recently changed its outlook for the global reinsurance sector to negative from stable, as it anticipates a number of negative rating actions and increasingly difficult business conditions for the sector over the next 12 months, according to a recent article from Guy Carpenter. S&P assigned a stable outlook to over 80 percent of global reinsurers and projects that reinsurers will not meet their cost of capital in 2020 for a third year in a row due to COVID-19 insured losses and lower investment returns.
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5. Mid-Year 2020 Reinsurance Renewal – Guy Carpenter U.S. Property Catastrophe Rate-On-Line (ROL) Index: The U.S. property catastrophe Rate on Line (ROL) index for January through July renewals was up 12 percent year-on-year. Pricing pressures have built through the course of the year: The mid-year data point represents a larger increase than what was recorded at January 1. Wind and wildfire-exposed programs once again played a prominent role in driving the index higher, with COVID-19 acting as an accelerating force.
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6. Why Human Resources is a Key Stakeholder in Cyber Risk Management: The human resources (HR) function has become integral to organizational cyber risk management in recent years. Along with information security/information technology (InfoSec/IT), HR is increasingly called upon to help determine and enforce employee data permissions, train and enforce cybersecurity policies and procedures and help respond to cyber events involving employees.
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7. Why We Need Community-Based Catastrophe Insurance: As disaster losses escalate around the globe, the difference between economic damages and the amount that is insured — known as the natural catastrophe protection gap — is an issue of increasing focus for community leaders and policymakers. Without disaster insurance, households and small businesses are often left struggling to repair and rebuild, reliant on competitive public relief dollars that can be stretched thin.
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8. Analysis of Potential Medical Claims Related to COVID-19: Examples of the types of direct insurance claims associated with COVID-19 include testing, doctor and emergency room visits, hospital admissions, stays in intensive care units and end of life care. Insurance costs in the United States associated with an inpatient hospital stay for pneumonia (a common complication from COVID-19) range from nearly USD 10,000 to over USD 20,000 (in 2018 dollars), depending on the length of stay, geography, coverage type and comorbidities of the patient.
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9. The Age Of Accelerating Strategy Breakthroughs: The tremendous public health and economic impact of the coronavirus pandemic has raised the global standard for efficiency and innovation. The world can’t magically go back to the way things were before. The resilient corporations that find success in the future will be those that can continue to turn on a dime as nimbly as they have during the early months of the pandemic.
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10. Governments Need Private Capital for Economic Recovery and Future Disaster Protection: The risk landscape for public sector entities is changing faster than ever before, with extreme weather, mass migration and unfunded social liabilities set to dominate government agendas for decades to come. Risks such as pandemics and climate change are, by their very nature, massively disruptive, and nations are responsible for an increasing share of the costs as communities and businesses rely more and more on state disaster relief.
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