While the pandemic has already had a significant impact on the sector, it will take time for many of its consequences to fully materialise. This is particularly true for claims, where a clear picture will only become apparent in the medium to longer term. Having said this, the European insurance industry has remained solid throughout the pandemic, with firms generally maintaining their solvency positions. In addition, insurers have continued to serve customers, while at the same time launching a broad range of actions that go beyond their contractual obligations to help clients.
COVID-19 has however presented insurance companies with unprecedented challenges. A certain level of supervisory flexibility is therefore crucial to enable insurers to adapt their products and services to new market realities.
In terms of risks for the insurance sector, the industry is particularly concerned about conclusions being drawn too fast and inappropriate actions being proposed as a result. It is important that the IAIS and its member supervisors adopt a long-term perspective in their assessment of COVID-19's impact, particularly in terms of issuing guidelines and measures.
It should also be noted that COVID-19 posed the first real test of the EU's Solvency II framework. While EU insurers' ratios remained high and well above regulatory minimums, Solvency II measures that aim to protect insurers from short-term market volatility failed and, in some cases, created inexplicable exaggerated changes in the solvency position of insurers. This has demonstrated that modifications to prudential frameworks, in Europe and beyond, should be comprehensively tested to ensure their effectiveness in a variety of stressed market conditions.
Finally, there is a pressing need to enhance the resilience of economies, financial systems and societies in general. This should include discussions about how pandemic risk can be covered in the future and the role that insurance should play in this regard.