Impact of the COVID-19 Pandemic on Insurance Companies in Europe - First Signals

Abstract

Action to prevent the spread of the Coronavirus Disease 2019 has been taken internationally. Service companies have been restricted, and a number of sports and cultural events have been postponed or canceled. As a result, the current pandemic has led to global socio-economic disruption. The current economic situation, caused by the pandemic, might significantly affect the functioning of insurance companies in Europe, as the insurance companies are in the delicate position of balancing a claims load with their capital and solvency stability. In this study, we evaluate the effects of the CoronaCrisis on the insurance companies. We use financial statements of insurance companies comprising European insurance companies during 2010-2020. The results unambiguously demonstrate that CoronaCrisis negatively affects the insurance sector’s stability. However, we do not see the effect of CoronaCrisis on the Z-Score ratio. Moreover, our estimation results demonstrate that the CoronaCrisis increase the value of receivables owed to the insurance companies. Therefore, in light of the above, European legislators should discuss how to manage probable financial problems of insurance companies. A lack of proper management would certainly endanger the customers' safety and stability of the sector. Therefore, we confirm that government interventions in European countries needed to prevent the insurance sector from collapse.