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Find all the economic and financial information on our Orishas Direct application to download on Play StoreThe Covid-19 pandemic first manifested itself in Wuhan, the capital of Hubei
in China at the dawn of the new Chinese year before attacking europe and the United States very quickly and
spread across the African continent like wildfire. This pandemic has affected to date, more
of 3.3 million people worldwide causing the death of more than 240,000 people including 24<895 in
France.
On the economic front, the rapid spread of the coronavirus is impacting several sectors of activity including
that of insurance.
The occurrence of each catastrophic phenomenon of a frightening nature gives rise to the reflex
to use the insurance mechanism to reduce or mitigate the effects created by this situation.
The global health crisis we are currently experiencing with the new coronavirus is not immune
to this principle.
• What answers can insurers provide to the Covid-19 insurance plan?
• What are the consequences of this health crisis on the insurance sector?
We will try in the developments below to provide elements of answers to these
questions to enlighten public opinion on the impact of this health crisis on the
insurance and especially the measures taken or to be taken to avoid a crisis in this vital sector of
the economy whose consequences on populations can be catastrophic.
For the insurance sector, the priority is to analyse with policyholders the continuity measures of their
activities. In many cases, it will be a question of playing our advisory role to limit as much as possible the risks of
disruption of the production chain of goods or services through the implementation of a continuity plan for
activities.
Is Covid-19 insurable?
The basis or basis of an insurance transaction is risk; that is, a random event
beyond the exclusive control of the parties. For the purposes of insurance technology, the consequences
of a pandemic or epidemic phenomenon are in principle excluded.
Covid-19, at the household level, is affecting health risks. For people who hold
of health insurance contracts, insurers should be held accountable for their commitments under the
health care benefits they received. The health claims expenses of companies
of insurance will have to undergo a very significant increase for a branch already in deficit. Note that the
average expenditure at the level of the health branch varies between 80 and 90% of the premiums received excluding
Insurers' management expenses generally estimated at 35% of the same premiums, i.e. a deficit of 25%
on average for insurers operating in the health sector outside cyclical crises of the type
Covid-19. Studies are underway to determine the real impacts, but it is certain that this crisis
health will impact the level of health deficit of companies in the Cima zone by at least 10 to 25 points
i.e. an overall deficit estimated at 50% of the premiums collected. You will agree that it will be a very hard blow
for the operation of insurance companies, which could lead to a crisis in the
assurances if nothing is done by the political and administrative authorities. To avoid this crisis in a
sector whose contribution to the development of our economies is no longer to be demonstrated and in such a way
Circumstances, the public authorities organize programs to take care of the affected populations
by the pandemic in order to limit the risks of spreading the virus as is currently the case for the
Covid-19 worldwide and in Benin in particular.
At the corporate level, Covid-19 is creating significant economic and financial risks, in
the occurrence of the risks of job loss and especially of operating losses. It is at this level that
poses the problem of coverage in terms of insurance.
Indeed, to protect themselves against the risks that can lead to the cessation of their professional activities, the
companies take out insurance contracts to cover the risk of business interruption. But this
type of contract provides for compensation from insurance companies in the event of fire,
explosion, water deg, machine breakdown, storms, hail and weight of snow on roofs, etc... Ces
types of contracts do not provide coverage for operating losses caused by restrictions
administrative following a pandemic or epidemic. This situation leads policyholders to wonder
the value of their insurance contract; others question the role of insurance companies in
this crisis and wrongly ask insurers to compensate companies with regard to
consequences of the financial losses resulting from this health crisis, which are excluded from
base. Some insurers offer their customers the pandemic or epidemic option with additional premiums, but
their level leads the insured to categorically refuse these unnecessary additions according to them. La
Consequence for the majority of insured persons is therefore the inability for the insurer technically to cover these
losses, since the basic premium did not include this pandemic risk.
We are all aware that this health crisis has been compounded by an economic crisis like no other
the consequences of which would impact the whole world.
However, ask insurers to retroactively cover uninsured risks in their
portfolios, would expose the sector to insolvency risks that would weaken the protection of policyholders, the
market stability and would ultimately aggravate the current crisis.
The principle of insurance is based on pooling: it works when it can spread a risk
between its insureds, i.e. use the premiums of the greatest number who are not affected to compensate
those who suffer a disaster. This is obviously impossible in the case of an event that affects the whole
world at the same time and full force.
It is for this reason that conventional insurance generally does not take into account, except in cases
express, cases of epidemic, revolution, natural disaster or war because the consequences are
out of range.
Impacts of Covid-19 on the insurance
sector
Impacted in the same way as all economic actors, insurers are confronted with
significant organizational challenges: responding to the urgency of their beneficiaries< situations while >
maintaining optimal quality of service.
Institutional investors, >
of insurance.
They are very well anchored in the closed circle of savings collectors and basically play three
(03) roles:
– prevention,
– risk coverage and
– the mobilisation of savings.
For each role, the insurer acts on several pillars of the national economy:
• the prevention required by the insurer forces the company to invest in protective equipment, which
protects both the farm but especially the citizens working in its units who run less than
risks of accidents in the performance of their duties.
• the coverage of risks requires the insurer to compensate for the damage caused. What induces the
mobilization of a whole set of service providers (health, auto expert, industrial ....). The victim is put back in
state of economic reproduction by reparation for the damage caused to it;
• the mobilized savings are deposited with the banks and reinjected into the national economy through
loans to individuals, subscription to government bonds.
At the macroeconomic level, the insurance sector is structured.
Whether it is the insurers that have provided coverage or the reinsurers according to their assignors, it is
Certain that to date, if contractual answers can be provided, the consequences in fine of
this health crisis will be major.
Indeed, the impacts of Covid-19 on financial markets will have cascading repercussions on the
insurance sector. For example, life insurance, already impacted by the deterioration in securities, will be
directly affected by the announced collapse of the said markets.
In the current context where the sectors impacted are legion, the repercussion on the coverage
of insurance associated with each sector of activity will be immediate.
The shift from this health crisis to an economic crisis also tends to have a direct impact
insurers and the prudential rules imposed on them.
In terms of impacts on the activities of the insurance sector, they could be assessed distinctly on the
two branches that are:
Life
companies
Largely affected by the deterioration of securities in previous years, life insurers must
now facing a pandemic crisis that is shaking financial markets and affecting profitability
of related investments.
From a technical point of view, the sector is not expected to suffer aggravated negative impacts because the impacts of the crisis
of the coronavirus are felt mainly indirectly.
In Benin, barring uncontained developments, the coronavirus pandemic will be an event that will have "no
significant consequences" on the life branch in 2020 because the mortality of the coronavirus will remain very low.
However, the life sector may face other difficulties in identifying reported deaths
directly to Covid-19.
Also, the decline in activities leading to the decline in turnover, could be the basis of
the accumulation of unpaid invoices and have as a consequence, the reduction or termination of contracts in
wallet. There could also be strong pressure on services, especially buybacks
partial and other benefits.
On the financial front, however, the coronavirus crisis will further affect the insurance sector.
Also, other effects can be felt such as:
– the reduction of emissions, due to a reduction in the saving capacity of households, which will have to do
in the face of health expenditure;
– the reduction of on
– the risk of a depreciation of values at the Brvm, which will contribute to further deterioration of the results.
Non-life
companies
With respect to property and liability insurance, the impact should again be "limited".
Business interruption claims will be limited as these insurance policies exclude
usually cases of infectious diseases and are triggered only in case of physical damage.
Better, these are the policies very little subscribed in Benin.
Insurers covering the cancellation of events (concerts, sports competitions) could be
more affected. But here again, the risk of an epidemic is often excluded from coverage.
It should also be noted that these are contracts with very little subscription in Benin.
On the French insurance market, for example, where these types of contracts are regularly subscribed, the
guarantee of the epidemic is often excluded as soon as there is recognition of the epidemic by the Who.
On the English market, on the other hand, it is systematically excluded and must only be redeemable in
extension, but the epidemic is not in the major risks of cancellation, the extension is often not
admitted.
The repercussions that non-life companies could suffer are:
– The decline in turnover;
– The increase in the loss of the disease branch. It is true that the management of Covid-19 is of the
is the responsibility of the State. But between the appearance of the first symptoms and the screening test, health insurance
supports the first analyses, medical and pharmaceutical expenses;
– The development of fraud in all its forms, especially in business interruption insurance;
– The incompressibility of fixed charges (rent, electricity and water, wages and corresponding taxes, etc.);
The impossibility for companies to meet certain commitments (if the pandemic lasts beyond three
month) ;
– The risk of downsizing to limit staff costs;
– The consequences of the semi-confinement, and more particularly the slowdown in activities
economic, significantly impact internal processes and extend compensation times;
– The amplification of the risk of cyberattack due to teleworking from home and the additional costs it could
train.
Insurers' advice to contain the health
crisis
As a priority, the advice will go in the direction of strict compliance with the barrier gestures prescribed by the
government to curb the spread of the virus, namely: stay at home; wearing a mask; regular washing
hands; coughing into the elbow; safety distance; greet without shaking hands and without
kiss ;
Next :
– Be assisted by a Riskmanager to establish a mapping of the company's risks with the
necessary treatments;
– Get closer to your insurer to expose your economic difficulties and take advice for the implementation
in place, if required, a business continuity plan;
– Etc...
The coronavirus crisis will plunge the whole world into an unprecedented economic recession.
Indeed, the Organisation for Economic Co< and Development (OECD) already notes in its
analyzes the prospect of an economic slowdown and revises its growth forecasts downwards by
2.9% to 2.4%
worldwide, and from 1.2 to 0.9% in France. This slowdown in economic activity will reflect a >
harmful volatility for insurance companies that will have to deal with several
cyclical difficulties, in particular a drastic fall in the volume of premiums, an increase in
claims charges, low interest rates for life contracts with tight cash flow.
It is therefore urgent that economic actors reflect on the post<19 period by focusing on their
faculty of resilience.
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