Speaking to The ReInsurer, Schneider said that while a lot of uncertainty looms over the actual outcome of this event, with a lot of the losses tied up in IBNR, the reinsurance sector will play a significant role.

“Based on the losses that we’ve seen thus far, we think they’re manageable but they do remain below the industry loss estimates that we’ve received which could be up to $50bn, so we do expect reinsurers to continue to report losses during the remainder of 2020, and bleeding into 2021,” said Schneider.

“There’s a lot of uncertainty around this and they’ll have it all in IBNR, but we’ll have to see how that all plays out.

“But overall, we expect the global reinsurance sector to cover half of the ultimate loss for the industry,” Schneider said in a video interview.

Indeed, where Covid-19 is also adding further uncertainty is around reserving, especially with how the pandemic will contribute to future loss trends, with social inflation also playing a role.

Schneider believes the reserve redundancies are already exhausted for the industry at this point.

“There’s really no more cookies in the cookie jars at this point, so we do expect to see more reserve strengthening coming through”

He said: “The recent accident years have turned deficient with the cycle really moving into the restoration phase so there’s really no more cookies in the cookie jars at this point, so we do expect to see more reserve strengthening coming through from various companies although not to the degree that we saw this in the early 2000s.”

He added: “Covid losses are adding more uncertainty to loss trends, but we feel as though the price increases are still offsetting the loss cost increases even with the heightened social inflation, but social inflation will drive lost costs in the future.”

On pricing, Schneider is optimistic the “favourable pricing environment” will continue into next year and during 2021 renewals and this could prompt the ratings agency’s outlook to swing from negative if the conditions are right.

Fitch recently maintained its negative outlook on the global reinsurance industry, but the positive pricing environment could be a change agent.

“Any outlook change that we have will be based on how those rate increases compare to any loss trends at those times and then more importantly, it’s going to be about getting clarity around the ultimate pandemic losses,” he said.

In terms of actual figures for these rate increases, Schneider said the ratings agency is expecting low double digit increases at 1 January 2021.

“The one that will be a bit more challenging when it comes through will be Europe as the region has not had the losses from a cat perspective as we’ve seen in the US and elsewhere, and we’ve not seen pricing increase at that type of level in the region,” he said.

On whether the changing market dynamics could prompt M&A in the market, Schneider said that companies are more focussed on improving the pricing environment and that the majority of growth will more likely be organic.

“However, to the extent that the hardening rates don’t serve as a sufficient offset to the pandemic related losses, I think we could expect to see select companies being taken over,” he concluded.