Hannover, 19 March 2020
Due to the fact that we have received a number of questions on this topic, we provide the following information:
Up to now, we continue to expect a small impact on the L&H result due to excess mortality claims. As a point of reference, a 5% mortality increase in insured mortality over a one year period (mortality rates multiplied by 1.05, returning to normal thereafter) would imply additional claims of approx. EUR 130 million.
Assuming the same increase to population mortality (multiply by 1.05) would imply a massive increase in deaths in the overall population, e.g., approx.. 135,000 additional deaths in the US, 30,000 additional deaths in the UK and 50,000 additional deaths in Germany. Such excess population deaths are significantly higher than numbers seen to date. However, the further development of the crisis is speculative and subject to uncertainty. The actual impact on Hannover Re also depends on whether insured mortality increases to the same extent as population mortality does. This depends on a range of factors including the age and general health status. Note that actual deaths from Corona reported so far largely affect the elderly population. Also, there is indication that the insured population is affected to a lower extent than the general population. Note that the economic downturn could have second-order effects on mortality or morbidity claims (e.g., excess suicides or increase in disability claims). Similar effects have been observed in the aftermath of the 2008 crisis. In addition, we have an index pandemic retro-coverage of EUR 360 million (two years cover) in place that will kick in at 110% - 120% mortality rate (in a 1-year scenario at 120% - 140% mortality rate). We are far away from a scenario were this coverage will be needed.
The net loss in a severe 1-in-200 years excess mortality pandemic event (as determined by our internal model) is approx. 8-times of the claims impact of the above mentioned scenario. The underlying mortality increase is significantly higher than the 5% example above and is expected to be representative of a substantially higher number of additional claims in the general population. This scenario is to be seen as a severe stress test driving SII capital requirements but it is not representative of the expected Corona loss to Hannover Re in our view.
We hope this finds you well. If you have any questions, we are happy to take those.