Liquidity tensions due to the Covid-19 crisis could weigh down some insurers

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Liquidity tensions due to the Covid-19 crisis could weigh down some insurers





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“Insurance is strong in capital and has strong resistance,” says the president of Unespa

“Spanish insurance has an excess of capital that gives it a very powerful resistance to face the crisis caused by Covid-19, which is not going to cause scares in the sector,” says Pilar Gonzalez de Frutos, president of Unespa. The insurers ‘management model, explains De Frutos to EXPANSION, “is prudent and limits its investment in the Stock Market”, which limits, in his opinion, the impact of companies’ losses in this market, and “the premium of risk, after a first moment of rebound, has returned to moderate positions, “he points out.

Against this background, “the European insurance supervisor (Eiopa) and the Spanish, (General Directorate of Insurance and Pensions) logically monitor the situation of the companies, but I do not detect that they are concerned.” The president of Unespa, explains that insurers “measure weekly the impacts caused by the crisis and so far the conclusion is that the operation of the business, a very important factor, remains reasonably well.”

There are still no reports on the most recent evolution of the insurance business, but “it is clearly seen that the consequences are different in each line of business.” The branch of health is the one that has fitted a faster impact. The companies have opted for a “very good way, since they are guaranteeing full assistance to their policyholders despite the fact that, in general, the pandemic is a guarantee excluded in the policies.”

In the automobile industry, says Gonzalez de Frutos, “it is very likely that the accident rate will be very low due to the strong restrictions imposed on mobility to stop the spread of the coronavirus.”

The representative of the Spanish insurers points out that the crisis of 2009 and the current one “are different”. Ten years ago “it was the financial system that concentrated the problems by drying its pipes due to lack of liquidity. Now the entire economic system is the one that has problems.”

For this reason, “policyholders, especially in non-life lines, may have difficulties paying their policies in the short and medium term, and mechanisms will have to be established to facilitate these collections. This may reduce the liquidity of some companies, since At the same time, they are obliged to attend their claims payments from their client portfolio. To date, we have not detected any problems in this matter, but it is necessary to monitor the liquidity situation of the entities, a problem that did not exist in the past crisis, where what we mainly saw was a drop in the volume of business in the sector. ”

In order to cushion these hypothetical difficulties, it is necessary to establish controls and resort, as the case may be, to the sale of investments in the entity’s portfolio that may detect a shortage of cash as a possible solution. ”

In the life field, despite the sharp decline in the markets, Unespa has so far not detected anticipated redemptions as expected, although it is expected that PPA reimbursements are expected, insured pension plans, after approval by the Government of these operations for the employees included in Ertes and the self-employed who see their income drastically reduced by the forced cessation of their activity.

Unespa applauds this measure to help these workers and its president adds that “from this situation we all have to get out together and hopefully we are so smart as to know how to distribute well and not leave anyone out.”

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