The war in Ukraine weighs on the results of reinsurers. On Friday, the French company SCOR announced that it would suffer 80 million euros in losses over the first three months of the year, after having put money aside to deal with the consequences of the conflict between kyiv and Moscow.
The group, which had warned that it would fall into the red this quarter, thus established a provision linked to the war of 85 million euros. His case is not isolated. Swiss Re announced a loss of 248 million euros after deciding to set aside 283 million to deal with the conflict. Hannover Re, which was profitable in the first quarter, set aside 143 million in the same logic.
“We made the choice to anticipate”, justified Friday the general manager of SCOR, Laurent Rousseau. Reinsurers expect to have to absorb the indemnities paid by insurers for insurance against political risks, credit insurance or even specialized insurance for maritime transport.
No claim notification
The most affected line of business could be the aviation insurance business after Moscow decided to ground hundreds of Western airliners on Russian soil in response to sanctions targeting the country. Rating agencies have estimated that this could cost insurers and reinsurers around $10 billion.
However, reinsurers remain in the dark. “At this stage, we have not received any formal notice of loss from the [compagnies d’assurance] ceding companies”, noted Romain Launay, head of property and casualty insurance at SCOR.
The financial consequences of Russia’s seizure of aircraft held by Western leasing companies seem particularly difficult to assess. The major aircraft lessor AerCap declared a loss of 3.5 billion dollars.
However, before being able to fix the amount of the invoice and its distribution between the insurance and reinsurance players, it will be necessary – among other things – to determine whether there is confiscation or theft of the planes or even if their blocking constitutes a single event or a series of events, because insurance policies work differently depending on the case.
Years of debate ahead
Sign of the complexity of the subject, the reinsurer Hannover Re clarified this week that the reserves it has constituted exclude aviation. “These are subjects that will take months and probably rather years before finding their end”, noted for his part Alban de Mailly Nesle, the financial director of AXA, during an update on the group activity on Thursday.
Like SCOR, the insurer estimates that at this stage, the cost of the conflict is equivalent for the group to that of a “medium-sized natural disaster”. However, the sector is closely monitoring the macroeconomic consequences of the conflict, such as the slowdown in activity in Europe, the rise in interest rates and the resurgence of inflation.
The Covid-19 is still being felt
The reinsurance sector also continues to be affected by mortality linked to Covid-19, particularly in the United States. This cost SCOR 195 million euros but also weighed on the results of Swiss Re.
The branch also has to deal with a high number of major natural disasters against a backdrop of climate change. In recent months, it has had to withstand the shock of storms in Europe, floods in Australia and drought in Brazil.
To maintain the course of growth, insurers can however count on a continuation of the increase in the price of their coverage.
Proxy advisory firms divided over keeping Denis Kessler as SCOR chairman
The voting advisory agency ISS is in favor of the change of statutes proposed by the reinsurer SCOR during its general meeting (GM) on May 18, but this is however not the case for its competitor Glass Lewis.
The proposed change of statutes opens the way to keeping Denis Kessler as Chairman of SCOR for another two years as he has today reached the age limit of 70, normally assuming that he will leave this position after the AGM. The agency Glass Lewis considers in particular that Denis Kessler does not need to remain president to ensure a peaceful transition with the new general manager and notes that the succession of the person concerned had not already been put in place calmly.
ISS and Glass Lewis also recommend voting against the compensation planned for Denis Kessler for his duties as Chairman and Chief Executive Officer until 2021. However, they are not opposed to the compensation of Denis Kessler as Chairman .