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Life insurers adapt pandemic risk models after claims jump

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LONDON – A coronavirus pandemic that lasts for five years, another pandemic in a decade and increasingly communicable variants are among the scenarios life insurers are predicting after COVID-19 claims rose more than expected in 2021.

The global life insurance industry has been hit with reported COVID-19 claims of $ 5.5 billion in the first nine months of 2021 compared to $ 3.5 billion overall. 2020, according to insurance broker Howden in a Jan.4 report, as the industry had lower payments expected due to the vaccine rollout.


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“We definitely paid more than I expected at the start of last year,” said Klaus Miller, Hannover Re board member.

The increase in claims was largely due to the emergence of the Delta variant, which is twice as transmissible and more likely to cause hospitalization than the original coronavirus strain.

Claims increased in US, India and in South Africa due to the deadliest variants and an increase in death or disease among younger, unvaccinated groups.

Dutch insurer Aegon, which does two-thirds of its business in the United States, said its claims in the Americas in the third quarter were $ 111 million, up from $ 31 million a year earlier.


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U.S. insurers MetLife and Prudential Financial also said life insurance claims have increased. Old Mutual of South Africa has used more of its pandemic provisions to pay claims and reinsurer Munich Re has raised its 2021 estimate of COVID-19 life and health claims to € 600 million against 400 million.

The long-term nature of life insurance products – which often last 20 years or more – means that premiums do not yet capture the risk that long-term death or illness from COVID-19 is likely to remain higher than foreseen. Competition in the industry also limits premiums.

Actuaries say the increase in claims will eat away at the capital that insurers have set aside for solvency.

During the initial “shock” period of the 2020 pandemic, the insured U.S. population suffered 12% more deaths than average, according to a study by the LIMRA life insurance trade association shared with Reuters.


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“For the insurance industry, it’s not huge because we have reserves,” said Marianne Purshotham, chief actuary of LIMRA.

“We’re still trying to compare the new variant to the initial shock,” she said.

The impact for insurers in 2020 was more moderate as deaths mainly concerned older people who typically do not purchase life insurance.


As the pandemic continues to surprise with the Omicron variant now becoming dominant, insurers, reinsurers and specialist risk modeling companies are looking to the future.

“We take into account the possibilities of more transmissible and less transmissible (variants),” said Narges Dorratoltaj, scientist at modeling company AIR. “We can’t say specifically which route we’re going to take, but we’re trying to come up with the possible ranges to at least narrow down the possible outcomes.”


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AIR takes into account periodic blockages around the world and also considers taking into account more uncertainty about whether governments will continue to impose restrictions to keep transmission rates low, and on individuals’ willingness to obey them. said Narges.

Risk modeling company RMS said its updated COVID-19 projection model allows variants, such as Omicron, that show elements of vaccine escape, as well as variants that could elude vaccines.

Reinsurer Swiss Re said its pandemic model takes into account more than 20,000 different scenarios. It has regularly updated its risk model with the latest data on testing, vaccination, infections, hospitalizations and death rates.



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With the emergence of the even more transmissible Omicron, COVID-19 vaccine maker Pfizer has said it does not expect the pandemic to become endemic globally until 2024.

AIR’s model predicts that the pandemic, caused by a virus first identified in China in December 2019, could last five years.

An excess of deaths could continue as the virus becomes endemic, like the flu which causes many deaths each year despite vaccines.

“We expect to see some mid-term (impact on claims) of five to 10 years,” LIMRA’s Puurushotham said.

More death or long-term illness will force insurers to set aside more reserves to pay claims, and may force them to increase premiums.

Insurance risk experts also claim that the opportunities for human-animal transmission, high levels of global travel, increased urbanization, and the impacts of climate change such as deforestation and disease-carrying mosquitoes. mean pandemics could become more frequent.


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“A new coronavirus outbreak is indeed likely in the near future – over the next 10 years,” said Brice Jabo, senior modeler, life risks, at RMS, referring to severe acute respiratory syndrome (SARS) and to Middle East Respiratory Syndrome (MERS) epidemics over the past two decades as early warnings.

The potential for a future corovanirus outbreak to revert to a pandemic would depend on its transmissibility and the strength of measures to combat it, Jabo said.

Bruno Latourrette, knowledge director at reinsurer SCOR Global Life, said he didn’t expect the next pandemic to be as devastating as COVID-19.

“COVID is… the perfect storm with pre-symptomatic contagiousness, lethality that is not too high to lead to ultra-strong zero tolerance measurements, decreased immunity, and high transmissibility. (Edited by Elaine Hardcastle)



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