Covid-19 Crisis: Assessing the impact of market volatility on European insurers

Companies: J.P. Morgan Asset Management

With the impact of the Covid-19 pandemic putting the insurance sector under further stress, we estimate the impact of recent market movements on European solvency ratios across life and non-life companies.

We are pleased to share our latest Insurance Insights paper, Covid-19 crisis: Assessing the impact of market volatility on European Insurers.

With the impact of the Covid-19 pandemic putting the insurance sector under further stress, we estimate the impact of recent market movements on European solvency ratios across life and non-life companies.

We also consider the potential for further balance sheet deterioration as the crisis unfolds through a series of stress tests and we provide some considerations for insurers looking to implement defensive allocations in capital constrained portfolios, while maintaining sufficient exposure to the eventual recovery in markets.

Key highlights

  • Recent market volatility has impacted European insurers in different ways, depending on the type of insurance company (life versus non-life), and the type of liabilities and level of guarantees commonly underwritten in an individual insurer's market.
  • Solvency ratios have decreased by about 25% with the volatility adjustment (VA) applied and 50% without the VA. Most of the decrease is due to own fund movements resulting from mark-to-market changes in asset prices — some of which is compensated by the VA.
  • Although credit downgrades and defaults may lead to further increases in market risk, some investment opportunities are now emerging across a range of fixed income and alternative asset classes.

Further information

Read the paper to find out more about the investment implications of the Covid-19 crisis for insurers.

If you would like to discuss any of the points raised above in more detail, then please don't hesitate to contact your usual J.P. Morgan Asset Management representative.

View Assessing the impact of market volatility on European Insurers.