With mounting novel coronavirus (COVID-19) liabilities straining insurers’ and reinsurers’ balance sheets, the pressing need to free the capital tied up in legacy portfolios can no longer be ignored. Sorting out legacy risk would not only relieve reserve pressure, but also release much needed capital to support growth. So, what are the options for tackling the legacy drain proactively, and why is it so important to address these issues now?
In a recent edition of The Voice of Insurance, Guy Carpenter’s Victoria Carter delivered a rigorous assessment of the balance sheet issues facing insurers in the wake of the COVID-19 pandemic and the resulting need to focus on capital relief. Ms. Carter examined insurers’ current concerns about capital management, market, and societal activity. These concerns have heightened insurers’ focus on capital management, and the tools they are considering to manage current and prospective capital requirements.
In June, I outlined criteria for insurers to consider as they navigated the COVID-19 minefield. Capital management was among the topics covered. The effects of the pandemic have highlighted that concern.