November 17, 2020 – The effects of the Covid-19 pandemic on the insurance industry were the topic of the first day of the autumn meeting of the German Association of Actuaries. Among other things, government assistance with the business closure insurance was called for.
The Covid-19 pandemic is expected according to the German Actuarial Association eV (DAV) especially for industrial and commercial insurance as well as capital investments for endurance tests. “The state-mandated lockdown across entire industries resulted in a total loss of 100 percent of the companies in the event and business closure insurance,” said Dr. Guido Bader.
- Guido Bader (archive photo: Schmidt-Kasparek)
Bader, the board of directors of Stuttgart Insurance group, emphasized that such an exceptional situation could not be foreseen and that it could not be insured in this form in a purely private sector: “Because, according to our calculations, the premiums in the business closure insurance would have to increase roughly tenfold for such protection.”
Since “probably no company” would conclude a contract with such a high premium, the actuaries supported public-private partnerships for insurance cover in the event of a pandemic.
Interest rates cemented at an extremely low level
The DAV CEO is also concerned about the pandemic-related distortions on the capital markets: “The corona-related massive increases in national debt worldwide and the central banks’ purchase programs have cemented interest rates, especially in Europe and especially in Germany, at an extremely low level for decades. “
Since the beginning of the pandemic alone, safe interest rates have fallen again by 20 to 50 basis points, which is increasingly being reflected in the solvency ratios of life insurers. The life insurers reacted to this with changed guarantee concepts – in other words, they guarantee fewer factors such as interest or sums.
Above-average increase in deaths
In contrast, the effects of the pandemic on the underwriting risks of life insurers have so far been manageable. The excess mortality has so far failed to materialize. The death rate was still within the normal statistical range, Bader reported.
Obviously, the clientele of life insurers differs from the population average. The Static Federal Office (Destatis) has nevertheless determined excess mortality from the pandemic. The development of deaths from March 23 to May 3 was compared with the average values for the past four years.
In the 15th calendar week, the deviation was the highest with almost 2,500 cases or 14 percent above the average of previous years, said Dr. Georg Thiel, President of the Federal Static Office at the conference. He attributes the effect essentially to an above-average increase in deaths in the age group 80 years and older.
Most customers continue to pay
In this group, the number of deaths in the 15th calendar week would have been 22 percent or just under 2,200 cases above the average of the four previous years. Taking into account the changes in the age structure of the population, the death rate in this age group at the height of the first wave is about ten percent higher.
According to the actuaries, the feared outflow of funds has not occurred with the life insurers. Only at the beginning of the pandemic would the cancellation rates have increased briefly and slightly. Rather, some customers requested deferral of their payments or exempted their contracts for a few months. The majority have already resumed their payments. Bader emphasized that there were no liquidity risks at any time.
PKV performs disproportionately
Dr. Ralf Kantak pointed out in his statement that private health insurers (PKV) were doing “far more” to cope with the pandemic than their share of the insured would do. The boss of the Association of Private Health Insurance eV (PKV-Verband) put the corona-related additional expenditure of the PKV at over one billion euros. Together with the aid, it is almost 1.4 billion euros.
He highlighted the financial and qualitative contribution of private health insurance as the second pillar in the dual German system. “We can also very confidently point out that many prerequisites for coping with the corona pandemic depend directly on the services of the private health insurance company,” said Kantak, the head of the SüddeutscheInsurance group is.
As examples, he cited the modern equipment of laboratories, the number of single rooms for the isolation of the sick and the offer of video consultation hours, which were financed or initiated by the private sector above average.
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