Life reinsurance companies are being buffeted by a number of trends and forces following the Covid-19 pandemic, with the upshot being that they are well positioned and well priced for any uncertainties that remain, according to a recent report by AM Best.

They are benefiting from a levelling off of pandemic-related claims, strong capitalisation and a firmer market. Life reinsurers may also be benefiting from higher prices as a result of inflation.

The report, issued September 6, is titled Life/Annuity Reinsurers Remain Prepared for Growth.

In the report, AM Best said that insurers, especially those in Europe, had been quick to adjust pricing and assumptions due to mortality rates remaining somewhat high despite the pandemic ending.

“Mortality rates have been higher but have thus far been manageable,” the report said.

The ratings agency added that it was not clear why mortality rates remained high and whether they would remain permanently elevated.

The report said: “The death tolls reported for Covid-19 were lower than what typical pandemic stress scenarios assume but excess mortality has still negatively affected the profitability of the global life reinsurers.

“Nonetheless, AM Best expects the impact of elevated life claims on most reinsurers to be a manageable earnings drag. Additionally, Covid-19 raised awareness of the need for life insurance, which, combined with the high cost of hospital treatments, drove an increase in demand for reinsurance.”

“Questions remain about the near and long-term impacts of pandemic-related mortality experience on assumptions and future pricing for the life reinsurance industry. Early evidence indicates different approaches to insurers’ mortality assumptions as some have updated assumptions and pricing for the pandemic experience but others have not.”

The report went on to note that US reinsurers have been transferring less risk to third-party reinsurers. They have been able to improve pricing and keep more risk to themselves using new technologies. It added that artificial intelligence and digitisation were being watched carefully by the industry.