Carolyn Cohn and Noor Zinab Hussain

LONDON (Reuters – After COVID-19 claims soared more than predicted in 2021, life insurance firms are predicting a coronavirus outbreak that will last five years and another one in a decade.

According to Howden, an insurance broker who reported Jan 4 that the global insurance industry suffered from COVID-19 claims of $5.5 billion over the first nine months 2021, compared to $3.5 billion overall for 2020. The industry expected lower payouts because of the introduction of vaccines.

Klaus Miller, a member of Hannover Re’s board said that “We certainly paid out more than what I expected at the start of last year.”

The Delta variant was twice as transmissible as the original coronavirus strain and is more likely to result in hospitalization. This is why there were so many claims.

Due to more deadly variants, a higher number of fatalities and illness in younger people and those not vaccinated, claims rose in South Africa and the United States.

Aegon (NYSE :), a Dutch insurer, stated that it had $111 million in American claims for the third quarter. That’s up from $31million a year prior. U.S. insurance companies MetLife (NYSE) and Prudential (NYSE) both reported that life insurance claims increased. South Africa’s Old Mutual spent more on its pandemic reserves to cover claims, and Munich Re increased its 2021 COVID-19 estimate for life and health to 600 million euros. It was previously 400 million. The long-term nature of life insurance products – often lasting 20 years or more – means premiums are not yet capturing the risk that deaths or long-term illness from COVID-19 will likely remain higher than previously estimated. Premiums are also being controlled by competition in this industry.

Actuaries predict that rising claims could be consuming the capital that insurers have set aside for solvency.

The initial period of pandemic “shock”, 2020 saw an increase in deaths for the uninsured, at 12%, according to LIMRA, a life insurance trade association. This research was shared with Reuters by LIMRA. Marianne Purushotham is LIMRA’s chiefactuary. She said, “That’s not big for the insurance sector because we have resources.”

“We always try to compare the new version to the original shock,” she stated.

In 2020, the impact on insurers was less because most deaths occurred among seniors who don’t usually take out life insurance.

CRYSTAL BALL GAZING With the Omicron strain of the pandemic continuing to be a surprise, insurance companies, reinsurers, specialist risk modelling agencies, and insurers are now looking ahead.

Narges Dorratoltaj (scientist at modelling company AIR) stated that “we take into consideration the possibilities of more transmissible or less transmissible” (“variants). We cannot predict which route we will take, but we try to narrow the possibilities.

AIR considers periodic lockdowns in the global network. Narges stated that AIR also thinks about incorporating more uncertainty into whether or not governments will continue to impose transmission restrictions in order to maintain low transmission rates and individuals’ willingness and ability to comply with them.

RMS Risk Modelling has announced that the updated COVID-19 projection models allow for variants like Omicron which have elements of vaccine escape and variants which could evade vaccines.

Swiss Re Reinsurer (OTC) stated that its pandemic models take into consideration more than 200.000 different scenarios. The company has kept its risk model updated with current data regarding testing, vaccinations, infections, hospitalisations, and deaths.

HOW LONG IS IT, AND WHAT’S NEXT? COVID-19, a vaccine manufacturer for Omicron has emerged. Pfizer (NYSE:) stated that it doesn’t expect the pandemic will subside globally to become endemic until 2024.

AIR predicts that the potential pandemic caused by a virus discovered in China December 2019 could last for five years.

The virus could cause more deaths if it becomes an endemic. It is comparable to influenza, which results in many deaths every year despite the availability of vaccines.

“We would expect to see some medium-term (impact on claims) of five to 10 years,” LIMRA’s Purushotham said.

Insurance companies will have to put aside additional reserves for claims in the event of more deaths and long-term illness. They may also need to increase premiums.

According to insurance experts, pandemics may become more common due to increased transmission rates between humans and animals. Brice Jabo at RMS is the principal modeller of life risks. This refers to SARS and MERS outbreaks over the past two decades.

Jabo stated that the transmission of corovanirus and the effectiveness of countermeasures will determine whether it becomes a new pandemic.

Bruno Latourrette is the chief knowledge officer at SCOR Global Life. He said that he didn’t expect that COVID-19 would be followed by a similar pandemic. COVID…is a perfect storm of pre-symptomatic contagiousness and a high level of transmissibility that leads to extremely strong zero tolerance measures.