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FOCUS-Life insurers will adapt pandemic risk models as claims rise

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* Global COVID-19 life requires $ 5.5 billion for 9 million 2021 brokers

* 12% of deaths among U.S. insurance policyholders in 2020 trade agency

* Risk modelers consider options, vaccines, blockages

LONDON, Jan. 13 () – A five-year coronavirus pandemic, another pandemic in a decade and increasingly contagious options life insurers predict after COVID-19 claims exceeded expectations in 2021 scenarios.

Insurance broker Howden said in a Jan. 4 report that the global life insurance industry fell to $ 5.5 billion in the first nine months of 2021 and $ 3.5 billion in 2020 due to COVID-19. lower payments are expected due to the release of vaccines.

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

The increase in claims is mainly due to the emergence of the Delta variant, which is twice as permeable as the original strain of the coronavirus, which can lead to hospitalization.

Claims here have been raised in the U.S., India, and South Africa due to the increasing number of fatal options and the increase in deaths or diseases among young and unvaccinated groups.

Aegon, a Dutch insurer who owns 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.

U.S. insurance companies MetLife and Prudential Financial also said life insurance claims have increased. South Africa’s Old Mutual has spent more to pay for pandemic claims, and reinsurer Munich Re has increased COVID-19 life and health claims for 2021 from € 400 million to € 600 million. raised.

The long-term nature of life insurance products – often lasting 20 years or more – does not yet cover the risk that deaths or long-term illness due to COVID-19 will remain higher than previously thought. . Competition in the industry is also stopping awards.

Actuaries point out that the rising claims fall on the capital that insurers have set aside to ensure solvency.

According to a study by the LIMRA Life Insurance Trade Association, during the first “shock” period of the pandemic in 2020, the U.S. insured population suffered 12% more deaths than the average.

“It’s not that big for the insurance industry because we have reserves,” said LIMRA chief actuary Marianne Purushotham.

“We always try to compare the new option with the first blow,” he said.

In 2020, the impact on insurers was greater, as the deaths occurred mainly in the elderly who do not receive life insurance.

CRYSTAL MORE VIEWS

As the pandemic continues to surprise with the prevalence of the Omicron option, insurers, reinsurers and risk modeling professionals are looking to the future.

“We are considering more transit and less transmission (options) possibilities,” said Narges Dorratoltaj, a scientist at modeling firm AIR. “We can’t say exactly which way we’re going, but we’re trying to develop possible ranges to at least minimize the possible outcomes.”

AIR takes into account periodic blockages around the world and also takes into account more uncertainty as to whether governments will continue to impose restrictions to keep transmission rates low or whether people will want to submit to them.

Risk modeling firm RMS said its updated COVID-19 projection model allowed options that show elements of vaccine avoidance, such as Omicron, as well as options that could avoid vaccines.

Reinsurer Swiss Re said its pandemic model took into account more than 20,000 different scenarios. It regularly updates its risk model with the latest information on testing, vaccination, infection, hospitalization, and mortality.

HOW LONG, WHAT NEXT?

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

The AIR model predicts that the pandemic caused by the virus, first detected in China in December 2019, will last five years.

Despite vaccines, excessive deaths can continue because the flu-like virus, which causes many deaths each year, remains endemic.

“We expect to see a medium-term (impact on claims) of 5 to 10 years,” LIMRA’s Purushotham said.

More deaths or long-term illnesses require insurers to allocate more reserves to pay claims and may force them to increase premiums.

Insurance risk experts also point to the possibility of human-animal transmission, high levels of global travel, the impact of urbanization and climate change such as deforestation and disease-carrying mosquitoes on the frequency of pandemics. means.

“A new coronavirus epidemic is really possible in the near future – in the next 10 years,” said Bris Jabo, chief model for life-threatening RMS, referring to severe acute respiratory syndrome (SARS) and Middle East respiratory syndrome. MERS) has escalated as an early warning in the last twenty years.

The likelihood that any coronavirus epidemic will turn into a pandemic again in the future will depend on its infection and the strength of measures to combat it, Jabo said.

Bruno Laturrette, chief specialist at SCOR Global Life reinsurer, said he did not expect the next pandemic to be as catastrophic as COVID-19.

“COVID is … a perfect storm with symptomatic contagion, not very high in lethality, leading to very strong zero tolerance measures, decreased immunity, and high permeability.” (Edited by Elaine Hardcastle)

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