The emergence of the Covid-19 crisis caused the abrupt paralysis of the world economy. The threats that loomed over a large majority of the sectors and their transmission channels were quite diverse depending on their nature. One of the most sensitive was the financial sector. Maintaining its proper functioning, lubricating the pipes that provide liquidity and financing to the rest of the sectors, constituted the first and fastest lever of action of the central banks, ensuring the stability of the markets. The therapy has worked, although the most emblematic of the financial subsectors, banking, faces serious damage to its loan portfolio. 2020 was the fourth year after the great financial crisis in which Spanish banks once again recorded losses after the “cleaning” of their balance sheets in 2011-12 and the fall and absorption of the Popular in 2017.
For its part, the insurance subsector faced threats that came from three channels: the potential adverse impact on income (premiums), on claims and on the valuation of asset portfolios that support provisions to face the contingencies of all type that covers the sector. The latter was suddenly noticed with the collapse, just after the pandemic was declared, of the markets (credit and shares). However, valuations have recovered, even very notably in some cases.
The impacts on premium income are slower in evolution and with very different effects depending on the lines of insurance activity. In non-life, health and multi-risk they have shown great insensitivity to the covid crisis, cars have a slight impact and certain lines of business more linked to economic activity have it moderately, so that globally the non-life as a whole registers positive growth. The line of business that has suffered the greatest blow of the pandemic is the life line, especially in its pension savings products. The structural component associated with the low interest rate scenario that has prevailed in recent years will be prolonged for a few more years due to the effects of the pandemic.
The loss ratio has been revealed, as is logical, highly dependent on the contingencies covered. Containment in car or health (restriction of mobility) have offset the increase in other smaller branches (credit and surety, deaths, civil liability, reinsurance …) so that, in the end, with great disparity, it has contributed a lot positively to the accounts of the sector. As a balance, the insurance sector, unlike the banking sector, defined an aggregate profit in 2020 in the area of maximums of the last decade. Once again, his ability to ride a crisis is demonstrated.
Daniel Manzano and Aitor Mildner They are a partner and responsible for Afi’s Insurance, respectively.