In focus

The courage premium - How insurers can weather the storm

Insurers are having their toughest year in a generation. Interest rates have collapsed to all-time lows, credit spreads have swiftly peaked to multi-year highs and equity markets have fallen to levels not seen in decades.

The impact on insurers’ liabilities has been meaningful too. Mortality in many countries has worsened, savings products have performed poorly and many insurers are finding themselves in political crosshairs around policy wording and exclusions.

Even, and perhaps especially, during times like these, however, there are
opportunities abound. Seizing the opportunities presented to insurers at a time when investors are fearful, offers them the possibility to emerge stronger on the other side of this crisis and earn the ‘courage’ premium.

In this article we have highlighted the salient impacts on capital markets and what the likely consequences are for insurers. We have also considered a range of insurance lines of business and explored the potential impacts on these.

Finally, we discuss the way that insurers can use recent market developments positively to enhance the performance of their portfolios and make the most of the opportunities currently present in the market.