Abstract
The European Insurance and Occupational Pensions Authority suggests that as the coronavirus disease 2019 (COVID-19) pandemic has caused significant disruption to the economy, businesses, and people’s lives, national supervisory authorities should mitigate the pandemic’s impact on the European insurance sector. The functioning of insurance companies is in danger as they must balance a drastic increase in the number of claims with their capital and solvency stability. In this study, we evaluate the effects of the COVID-19 pandemic on insurance companies using European insurance companies’ financial statement data from 2010 to 2020. The results unambiguously demonstrate that the pandemic has negatively affected the functioning of the insurance sector. In particular, the return on assets decreased in German and Italian insurance companies during the pandemic. Furthermore, the solvency ratio decreased in the Belgian, French, and German insurance sectors. Conversely, the Polish insurance sector was unaffected. Moreover, we did not find any effects on the Z-score ratio in our sample. Lastly, the value of receivables owed to Belgian insurance companies increased. Based on this evidence, we argue that European legislators should discuss how to manage the probable financial problems of insurance companies during the COVID-19 pandemic.
Highlights
Introduction and FinancialManagement 14 266.The coronavirus disease 2019 (COVID-19) pandemic has significantly affected people’s lives worldwide as well as the economy
The results unambiguously demonstrate that the COVID-19 pandemic has negatively affected the European insurance sector’s functioning
We perform several tests to see if the COVID-19 pandemic influences the performance of European insurance companies in Europe
Summary
Introduction and FinancialManagement 14 266.The coronavirus disease 2019 (COVID-19) pandemic has significantly affected people’s lives worldwide as well as the economy. Concerns have been raised regarding the solvency of insurance companies. The European Insurance and Occupational Pensions Authority (EIOPA) has been working in close cooperation with national supervisory authorities to mitigate the pandemic’s impact on the insurance and occupational pensions sectors in Europe. Gabriel Bernardino, EIOPA’s chairman, stated the following: “The insurance sector must deal with challenging market conditions and maintain operations, while at the same time protecting employees and policyholders”. The pandemic may have seriously affected the operation of European insurance companies, placing them in the delicate position of having to balance a large volume of claims with their capital and solvency stability (Karlsson 2020). The risk exposure of the European insurance sector has increased as a result of the pandemic
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