Reinsurance is the practice whereby insurers/captives transfer portions of their risk portfolios to other parties (reinsurance markets, capital markets) by some form of agreement and share losses from an insurance claim as per policy terms and conditions with such parties. These transfer is through reinsurance agreements, captive arrangements (https://www.artemis) and catastrophic bonds (https://www.artemis.)
In the event of payable claim both the ceding party and the re insurer participate on paying the claim as per the terms and conditions of the agreement.
COVID-19 makes it quite challenging to predict what insurers and re-insurers can expect from the future as regards to the claims. (https://home.kpmg/xx/en/home/insights/2020/03/do-insurers-have-covid-19-covered.html)
But expectations are that when the curve flattens through various government and non-government initiatives both locally, regionally and internationally, we expect a gradual return to “old normal” we shall have a clear picture of the claims dynamics that will impact on the insurance and reinsurance figures (GWP, Claims Paid/Reserves, Management Expenses, Investment Returns and effect on the bottom line). These results will determine on the supply of insurance and reinsurance which will also affect the price of insurance. (https://www.insurancebusinessmag.com/us/guides/what-is-a-hard-insurance-market-180382.aspx)
In Uganda we have seen insurers cover Covid -19 claims under their respective medical and life covers. Whilst most reinsurance treaties treat epidemics as exclusions, many reinsurance partners locally, regional and international have given special acceptances for some classes. This of course is guided by individual company risk, compliance and actuary guidelines with support by the Insurance Regulatory Authority guidelines (https://ira.go.ug/news_details.php?det=109) (Ira Issues Comprehensive Industry Guidelines During Covid-19 Period)
The losses lodged under various polices will especially in regard to COVID 19 for Non-Life insurance and even Life policies will generally be treated on case by case basis. Based on final figures in the next 18 months underwriters may take a keen look at policies issued (scope, clauses, warranties, terms and conditions) as client will also take a very keen interest in the scope of insurance to ensure its adequate based on risks faced and value for money paid for insurance.
We shall see a gradual uptake of Enterprises Risk Management, Business Continuity Management and increased role of Technology. All these have pros and cons on business and in our next article we shall share how we can support business in these three areas as part of our value proposition.