The pandemic’s reinsurance legacy
Axis Re’s Cyril Caillo reflects on the lasting impacts of Covid-19 on accident and health reinsurance.
Three years on from the start of the coronavirus pandemic, what lessons can we take from it?
It’s worth remembering how incredibly complex Covid-19 was, and is, by its nature. It has unique characteristics and it’s fair to say we – the (re)insurance industry, medical sector etc – do not have all the answers and maybe we never will. This was notable in the fact Covid-19 killed millions around the world, but mortality rates differed significantly depending on geography. It spread in different ways and at different times – Europe’s outbreak started in March 2020 with the biggest waves in the following 12 months, but the most significant wave in Japan wave came about during the summer of 2022. In some other countries, there were even measured differences between the insured and the non-insured populations, with the pandemic having less of an impact on the latter, which was the opposite of what we observed in most of the world.
From a reinsurance perspective, the main lesson we took from the pandemic was around having robust language in our wordings. It was extremely important to define coverage parameters in the most precise way possible to avoid any gaps or areas subject to interpretation.
Is there anything the industry can do today to prepare for the possibility of another pandemic?
Each pandemic is unique, and Covid-19 is a very complex virus. Therefore, we can only expect the unexpected. The next pandemic could be completely different. Covid-19 mostly impacted those over 65 years old, but there is nothing to suggest the next pandemic will have the same impact. Who’s to say it won’t be more lethal to younger patients? It would be risky to assume any future pandemics will be the same. Therefore, we shouldn’t rely only on Covid-19-specific lessons when futureproofing. During the Covid-19 pandemic, some reinsurance covers were not triggered – like life aggregates – as they had only been structured for solvency reasons. It would be a mistake to think that because these were not used during Covid-19, such policies are useless. They could very well play a significant role in the future.
What do you see as the biggest opportunities and challenges for life, accident and health reinsurers for the rest of 2023 and next year?
We cannot ignore the political and economic changes occurring in the world today, with higher interest rates undoubtedly putting pressure on the cost of capital. More specifically in our industry, we have seen growing interest in Europe for mass lapse cover, which helps life carriers from a solvency ratio perspective. Recently, we have seen interest spike for this type of cover from markets outside Europe, such as Korea, and I wouldn’t be surprised to see demand grow from similar markets in the region.
Going back to Covid-19, we can’t ignore the long-term impacts of this pandemic, such as higher cancer frequency, ‘long Covid’ diagnoses and so on. This was a major health event. Some large life carriers recently reported that mortality rates are still elevated from pre-pandemic levels. Will they normalise? Are there other factors we are ignoring? Covid-19 was a mystery, one which reinsurers are still trying to solve.
There are many complex factors at play in today’s dynamic market that require a specialist approach. At Axis Re, we are able to offer specialised solutions and underwriting expertise that meet the needs of our customers and partners – adding value to a complex environment.
Cyril Caillo is head of accident and health international at Axis Re