Speaking to The ReInsurer, Parton highlighted that any positive changes in social inflation trends driven by the pandemic were only “temporary” and that a sustained period of rate increases is required if prices are to compensate for loss trends.

“We don’t see any signs or any evidence that the trends around social inflation are improving,” she said in a video interview.

“We have seen temporary positive impacts arising out of the economic shutdown from Covid – this may be a reduction in frequency of losses or an acceleration of settlements for some smaller losses. But we think longer term that these will be reversed and that pressure around social inflation trends and also the low interest rates means that we have to have sustained rate increases in order to compensate for those loss trends.”

Parton added that it will take some time before the industry is able to quantify the total impact of the pandemic and highlighted the UK Financial Conduct Authority’s (FCA) High Court test case into business interruption claims as one of many “legal challenges” that may impact estimates.

“It will take some time and the FCA decision last week is an example of some of the legal challenges that will likely protract that level of clarity,” Parton added.

“Things will begin to get clearer by the end of 2020 and the beginning of 2021 but in some areas I can see it taking another three to four years.” 

Commenting on the FCA’s test case, Parton noted that while many headlines appeared to suggest it was a win for the claimants, the judgment was more “nuanced”.

“What is really important to know is that for insurers and reinsurers to work out the ramifications, they will have to look case by case to apply their wordings to the outcome of the judgment and then to the individual facts for each claimant,” Parton said. 

The pandemic has also led to investors seeking to better manage volatility which is in turn leading to a flight-to-quality, something that will benefit larger (re)insurers such as Swiss Re, Parton added.

“There are people looking for support, whether it’s to shore up capital or reduce volatility. In all of that you see a flight to quality for the leading insurers. That’s a positive sign.”

Parton said it is clear that the industry alone cannot sustain pandemic risk. It has to be a combination of government and private partnerships that will make pandemic an insurable peril and offer the resilience needed, she added.

“Clearly insurance companies have the ability to help with distribution and Swiss Re is ready to support governments as to how these can be set up and we’re supportive to see how we can develop that for the future to provide the resilience that countries need going forward.”