Global credit ratings agency, AM Best says excess mortality has negatively affected the profitability of global life reinsurers but adds that the impact of elevated life claims is likely to remain a manageable earnings drag.

“The report states that the global life/annuity reinsurance segment remains well capitalized and positioned for robust growth,” say authors of Best’s Market Segment Report, Life/Annuity Reinsurers Remain Prepared for Growth. It goes on to say that the impact of COVID-19 on life reinsurers has been less pronounced than initially expected, even with elevated mortality seen in some demographics. “Whether the pandemic will cause a permanent shift in mortality, or if mortality will revert to pre-COVID levels remains to be seen.”

They say elevated claims have leveled off and are manageable but add that pinpointing direct causes and determining future direction has been difficult.

And while life reinsurers have noticed an uptick in deaths related to liver disease, drug use and diabetes, AM Best also observes that some reinsurers have updated their assumptions and pricing to reflect pandemic experience, while others have not.

Looking at competition, they say the traditional life reinsurance market remains concentrated, with top companies reinsuring the vast majority of business. (Top companies accounted for 96 per cent of United States’s individual and group life in-force business reinsured.) At the same time, however, private equity-backed insurers have also emerged as startups in the annuity and block reinsurance markets. “New capital clearly has come into the life reinsurance segment, which AM Best views positively,” said the ratings company’s director, Edward Kohlberg in a statement about the publication’s release. “Capital providers that are impatient and lack a long-term focus will be unable to achieve their business goals.” 

Overall, they say the life reinsurance segment remains capitalized within target levels.