HX, the data and analytics division of Howden Group Holdings, has announced the release of its Q3 2020 insurance sector earnings update, focusing on COVID-19, capital, catastrophes, and pricing. The update’s key findings were that COVID-19 losses are increasing sector risk premiums, driving higher rates across most lines. This, in turn, is creating opportunities for margin expansion, resulting in an infusion of new investment capital, HX said.
Other key findings of the report include the fact that premiums have grown in every quarter in 2020 despite reduced economic growth expectations. The growth has been driven by rising prices and increased business volume. “The insurance sector’s counter-cyclicality is proving attractive to new investment capital in the current environment,” HX said.
While US natural catastrophes blew past expectations with a record number of Atlantic Basin windstorms this year, the level of global catastrophe losses so far is only slightly elevated. COVID-19 claims have contributed $26 billion of 2020’s $95 billion total insured losses to date. COVID-19 losses do not yet represent a game-changer in terms of loss quantum alone, HX said.
The generally conservative reserving trends seen early in the year have eased as confidence grows and insurers capitalize on rate movements. It is likely that the peak of COVID-19 losses has been accounted for, enabling capital deployment for growth.
Lower investment returns continue to put pressure on net income, but composite underwriting returns in the first nine months were stable despite large accident year losses, HX said. This is due to much lower levels of adverse development in the first nine months compared to the same time last year.
“As we come to the end of an incredibly difficult year, the overall outlook for the insurance sector is nonetheless positive, allowing insurers to focus on revising growth targets upwards, attracting capital for underwriting expansion and enhancing the use of rich data to transact risk more efficiently and effectively,” said David Flandro, head of HX Analytics.