Pandemic Framework of the Insurance Business Cover Image

Пандемично рамкиране на застрахователната дейност
Pandemic Framework of the Insurance Business

Author(s): Stoyan Kirov
Subject(s): Economy, Financial Markets
Published by: Университет за национално и световно стопанство (УНСС)
Keywords: COVID-19; health risks; life insurance
Summary/Abstract: COVID-19 has completely changed the economic environment by highlighting health and production risks. The pandemic has dramatically increased morbidity and mortality, slowed the development of capital markets, created conditions for inflationary pressures, reduced business activity and increased people’s anxiety. The pressure on insurers, such as crisis management institutions, is enormous. Many countries around the world find it justified and logical for insurance companies to expand their risk coverage and bear much of the economic loss. Some of them even believe that this can happen retroactively. Of course, such perceptions are detrimental and can lead to even greater market imbalances instead of having the desired stabilizing effect. In this situation it is wiser for insurers to be moderately conservative than unreasonably innovative.The pandemic affected life insurers and related reinsurers much more. The reasons for this lie in the type of obligations they have to their clients, the structure of their assets and the regulations applied to them. The high mortality rates during COVID-19 led to an increased number of claims, which exacerbated the risk of insurance insolvency. In addition, the profitability of their investments shows a constant negative trend which hinders portfolio diversification. The increased investment risk will cause stricter measures by government agencies, incl. increased capital requirements for life insurers. Due to the presented arguments COVID-19 impacts on the life insurance market are being analyzed here.