Covid-19, Solvency II and ESG factors will all be influencing global multiline insurers’ balance sheets, says S&P Global Ratings

By Editor Katie Scott

Although direct market insurers’ bottom lines have undoubtedly been hit following the fallout from the Covid-19 pandemic, the resulting impact on earnings is now “more significant” for the reinsurance market, according to Marc-Philippe Juilliard, director of insurance ratings at S&P Global Ratings.

Speaking at a webinar yesterday (21 July 2021), titled ‘Covid-19 impact on global multiline insurers’, Juilliard explained that the Covid-19-related losses experienced by the top 20 global reinsurers that S&P rates amounted to $20bn (£14.7bn) in 2020.

Katie Scott_bw_path

Katie Scott

In comparison, across the 16 global multiline insurers (GMIs) that S&P reviews, the cost of the pandemic added up to $8bn (£5.8bn) in aggregate for 2020, still leaving these businesses with a total net income of $36bn (£26.2bn).

Furthermore, one-off items not directly related to Covid-19 – such as goodwill payments – cost GMIs more last year than pandemic-linked factors. These reduced GMIs’ net income by $12bn (£8.7bn).

Despite Covid costs moving more notably to the reinsurance market, Juilliard added that GMIs dealing in property and casualty (P&C) commercial line business were hit the hardest last year financially, with the losses posted by the three most exposed players accounting for more than half of the pandemic-related decline in net income across the 16 GMIs.

He said: “We expect the economic and financial shock of Covid-19 to remain visible in the earnings of GMIs in 2021, [although] less than it was in 2020 as vaccinations [are] increasing and the pandemic weakens in the world’s largest insurance markets.”

Juilliard confirmed that S&P Global Ratings’ view here also took into account changes to terms and conditions for commercial lines policies, “including the insurgence in exclusions for pandemic-related claims and also increase in tariffs, especially for the most affected business segments. I’m obviously thinking about business interruption coverages, as well as event cancellations.”

But GMIs’ earnings will recover, Juilliard noted, following the roll out of the Covid-19 vaccine.

“Insurers are likely to see an increase in claims in personal lines, especially motor as lockdown ends or loosens up. Clearly, for a number of players active on personal lines, lockdowns had a very positive impact on the underwriting performance in 2020 because there were less, and sometimes much less, accidents – but obviously this trend is going to reverse as of 2021,” Juilliard continued.

“All in all, what we anticipate is a recovery in earning for GMIs this year and next year as well as the pandemic comes under control hopefully.”

With insurers’ half year results scheduled to trickle in over the next couple of weeks, it will be interesting to see whether the trends observed by Juilliard are starting to play out already, or whether we’ll have to wait for later in the year for earnings recovery to be more marked.


When discussing insurers’ financials, Solvency II is also going to be a consideration – especially as this is pipped for reform by the government.

Juilliard, however, believes the resulting impact on GMIs could be mixed. Larger GMIs may even reap a “positive” result from regulatory change here as they have the wherewithal to establish and operate internal models, compared to smaller firms that may not be able to invest in this.

There’s also the hot topic of environmental, social and governance (ESG) factors and how these can impact on GMIs financially.

“At this stage, we have not seen a material impact of ESG policies on either premium volume or underwriting performance for any of the multiline insurers we rate,” Juilliard said.

“That being said, we all observe that there is a growing trend for claims related to natural catastrophes - [for example], what recently happened in Germany. Our view is that insurers have to adapt to this new normal.”

For Juilliard, accommodating ESG moving forward could see insurers adjusting their underwriting guidelines, encouraging clients – especially large commercial lines ones – to adopt more environmentally friendly practices, or even gradually withdrawing from insuring some types of businesses, for example, those related to coal.

Although the pandemic has been viewed as the key risk to business balance sheets for the past year, Solvency II and ESG factors are now also playing their part as the vaccine relaxes Covid’s grip on firms’ financials.