Originally Posted by
David.Lewis
The news loves to distort reality. Reuters does a nice little scare quote from Hannover Re about how claims are higher than expected (true). Then, ties it in with their opinion about Delta being the cause (shockingly, with no real evidence).
I am not as familiar with foreign life insurers. But, I do know that this is mostly considered a blip in the grand scheme of things for U.S. life insurers because they consider this a mortality *event* and not a mortality *trend*. Reuters assumes, with zero evidence, that this is a mortality trend.
As for eating up more reserves to pay claims, yes this has happened. I already covered this in my article on my blog, but let's cover this again with a specific example:
Northwestern Mutual (one of the oldest, largest life insurers in the U.S.) paid out $3.965 billion in claims through Q3 of 2021. This is against $17.7 billion in policy reserves. Was that $3.x billion more than they expected? Sure. Does this unexpected payout put them at insolvency risk? If you have enough math skills to subtract one number from another, the question answers itself.
Even at the large international reinsurers, this looks fairly small, in spite of large mortality increases for 2020 and 2021. The article mentions Hannover. They posted (I think) losses of $404 million, but still netted a gain for 2021. Even when we get down to the one-year term (pure insurance) products, where mortality has a direct impact on profitability (which is the boat reinsurers are in right now), all these insurers like Swiss Re, Munich, SCOR, Hannover, etc. refer to COVID as a temporary disruption and very manageable.
In other words, this is not a cataclysmic event in the way Reuters wants it to be.
Contrast Reuters reporting of a 12% rise in mortality in the life business with the "shock value" of reporting One America's 40% rise in the group market. Yes, both are fairly large increases, but zoom out and we're still talking about small absolute numbers relative to the total. But even the disparity in relative increases is huge, and the narrative is getting away from them. The reality isn't what they want it to be, which is a story about how the world is ending or how COVID is a permanent fixture that will forever cause problems. The world isn't ending, COVID will not forever cause problems, which should make everyone happy. But, instead, it seems to make these folks try harder to explain why the world is ending, why you should live in fear, why everything will not be OK, and why your life insurance will get more expensive. These people are going to put readers on anti-depressants.
Speaking of which, there is something the news *isn't* talking about, and that is the long-term mortality *trend* totally unrelated to COVID. There is increasing mortality tied to things like opioid addiction/OD and other health problems (mental, physical). Right now, mortality improvements (in a very broad sense) have stalled. It's not clear how *this* will affect long-term pricing for insurance but my guess is it's not going to be good.