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Impact of the COVID -19 pandemic on the global insurance market
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230 
Strupczewski Grzegorz 
PhD in Economics & Finance, 
Assistant Professor
Klonowska Alina 
PhD in Economics & Finance, 
Assistant Professor
Department of Risk Management & 
Insurance 
The Cracow University of Economics 
(Cracow, Poland)
IMPACT OF THE 
COVID-19 PANDEMIC 
ON THE GLOBAL 
INSURANCE MARKET
1.
Introduction
The pandemic of COVID-19 has been spreading across the world. 
The expected economic consequences might be as severe as 2% 
decrease of the global GDP (Moorcraft 2020). It means that almost 
every sector of the economy is threatened, including the insurance 
sector. McKinsey report that insurance industry could lost USD 760 
billion globally because of pandemic (Chester 
et al. 
2020). 
The aim of the paper is to address potential impact of the Covid-19 
on the global insurance market. Our study focuses on the January-May 
2020 period of time. We think that despite rapid, negative symptoms of 
change in the short term, the long term COVID-19 effects for the global 
insurance market might be positive. 
2.
Insurance sector and its impact on the economy literature 
review 
Insurance sector is one of this elements of socio-economic system 
which plays an important role in supporting economic activity. Analysis 
of the literature on the subject allows to indicate a selected significant 
conclusions (Table 4.1). 
As Swiss Re highlights, the importance and role of insurance in 
supporting sustainable development and global resilience are becoming 
increasingly important (Swiss Re 2019). In the first time in 2018 the 
insurance premium amounted to USD 5 trillion and it represented over 
6% of global GDP. But unexpectedly exogenous shocks caused by 
pandemic have disrupted favourable time and now it has negative 
impact on insurance sector. Hence due to severe forecasts on future 

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231 
economic growth the objectives and challenges of insurers formulated in 
the past are now subject to the revision. It is crucial to adapt insurance 
companies strategies to post-crisis economic conditions to maintain this 
significant role of the insurance sector in the national economy. 
Table 4.1 
Studies on impact of insurance on the economy 
Author
Main conclusions 
Skipper (2001),
pp. 29-35 
The more developed the insurance market, the 
greater is its contribution to economy. Insurance 
allows to maintain the financial stability, facilitate 
the efficient allocation and increase the tendency to 
invest. 
Haiss and Sümegi 
(2006) 
The importance of the insurance is growing due to 
the increasing share of the insurance sector in the 
aggregate financial sector. 
Adams 
et al.
(2009) Insurance is an important prerequisite for 
stimulating economic growth. That this could have 
important implications for developing economies. 
Chau 
et al.
(2013) 
Insurance helps alleviate the unstable economic 
situation
.
Vucetich 
et al.
(2014), p. 10 
Insurers help to stabilize the economy especially 
during times of a financial crisis. 
Przybytniowski 
(2016), pp. 125-159 
Insurance impacts on greater stability in economic 
development. 
Source: author own 
3. How can the insurance industry be affected by the Covid-19 
pandemic? 
Based on desk research of current insurance industry reports and 
business news, potential negative consequences of the Covid-19 
pandemic for the insurance industry were identified. Then they were 
categorized to one of the five areas: Insurance demand, Insurance 
claims, Operation of insurance carriers, Social and customer relations, 
Insurance supervision and regulation. 
3.1. Area of the insurance demand 
As the result of the economy lockdown, drop in revenues, decrease 
in the GDP growth rate and an increase in unemployment, the 
immediate influence of the pandemic is a decline in sales of the 

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232 
following insurance lines: 
Property insurance.
The decrease in sales of consumer goods, 
caused by the deterioration of the economic situation, will influence the 
demand for property insurance lines. The best example of this 
interdependence is the automotive market. It saw a clear drop in sales of 
new cars, followed by a decrease in the number of new motor insurance 
policies (
2020). The same effect was brought 
about by cutting the size of vehicle fleets in enterprises and the disposal 
of cars in those households that owned two or more cars. 
Remote work, reduced use of cars for daily commuting due to 
stay at home orders may change consumer attitude towards 
motor 
insurance
and its pricing. Financial problems of individuals and 
companies, the need to rationalize expenses, consolidation of the habit 
of leaving home only when necessary will probably create demand for 
more flexible, on-demand coverage, based on the UBI model (Alleaume 
2020). 
The demand for
cargo insurance 
will probably drop as the result 
of mandatory quarantine in international traffic, restrictions on 
movement, as well as a decrease in trade turnover. Consequently 
reduction in number of transports, change of their routes, suspension of 
some commercial connections or delays in carrying out transport orders 
may be expected (Yeshin 2020). 
Life insurance.
McKinsey predicts demand for life insurance will 
fall for three reasons: lowering the living standard of a part of the 
society, higher premiums due to lower interest rates with a more 
cautious approach to underwriting, and problematic access to medical 
tests (Balasubramanian, D Amico & Godsall 2020). Greater emphasis in 
personal risk underwriting might be placed on issues such as 
international travels, especially trips to countries with high number of 
Covid-19 cases. Perhaps insurers will more often apply grace periods 
when entering into an insurance contract. 
The Covid-19 pandemic could accelerate sale of 
health 
insurance
, daily hospital benefits and medical assistance. In China after 
the SARS epidemic in 2003 spending on health insurance doubled 
(Sandhu & Prasanna 2020). 
3.2. Insurance claims 
The sharp growth in insurance claims related to Covid-19 will 
include a broad spectrum of insurance lines: 

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233 
A surge in claims in trade 
credit insurance
should be expected. 
Many companies will suffer from closing, declining revenues, reducing 
orders, and problematic international trade. This can trigger the 
insolvency chain throughout the entire supply chain, and it will directly 
hit insurers. A certain increase in claims will probably occur in 
insurance lines covering the cancellation of commercial, cultural or 
sport events. For example, it is estimated that the canceled Olympic 
Games in Tokyo will cost insurers the amount of USD 2 billion (Sandhu 
& Prasanna 2020).
Business Interruption insurance
generally does not cover 
damage caused by business interruption due to a pandemic, because 
there is no physical damage to the insured s assets as a cause of 
downtime. Exemptions related to the effects of viruses and bacteria were 
introduced into the terms of insurance after the SARS epidemic in 2003.
Another area with potentially high insurance claims is 
workers
compensation insurance
(work accident, health and employer s 
liability coverage). A wave of workers claims against employers for not 
providing proper working conditions and excessive exposure to health 
damage during the pandemic can be expected. 
The scale of impact of Covid-19 on 
health insurance
depends on 
national health care systems in particular countries. Generally speaking, 
public health care dominates in Europe, the private healthcare services 
play a key role in the US, while in Asia the public healthcare system is 
often inefficient and needs to be supplemented by private healthcare 
providers. During the pandemic, stationary visits for a doctor are being 
switched to on-line consultations (so-called telemedicine). In countries 
where testing for Covid-19 and treating cases is the domain of public 
healthcare providers, the direct impact of the pandemic on private health 
insurance will be limited. 
Preliminary estimates of income losses suffered by the insurance 
industry show tens of billions of dollars in loss. Lloyd s of London 
predicts that insurance and reinsurance industry can expect greater loss 
than damage caused by Hurricane Katrina (USD 50 billion). UBS 
predicts USD 60 billion loss (Evans 2020). If the forecasts were to come 
true, there might be a need for state intervention to save the solvency of 
the insurance sector in some countries. 

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234 
3.3. Operation of insurance carriers 
Typical business continuity plans were built as a response to natural 
disasters, cyber incidents, terrorist attacks or media outages. However, 
the Covid-19 pandemic has brought completely different types of 
disturbances, such as quarantine, stay-at-home orders, long-term 
school closures and travel restrictions. These circumstances were not 
taken into consideration, no remedies were developed in-advance that 
would ensure the maintenance of the company s operational capabilities 
and maintain the desired work efficiency. Hence insurance companies 
face the following challenges: 
Cyber risk.
The increase in exposure to cyber risk is the result of 
switching to the remote work model. Remote work model and unsecure 
access to confidential information assets exposes insurers to cyber risk 
and requires a special model of cooperation with the highest 
cybersecurity standards. Using public and unsecured hotspots, lack of 
virtual private network (VPN) or using VPN with insufficient number of 
servers that are unable to handle the load created by employees, poor 
password quality are the most common issues. 
Overview of internal processes 
is needed to adapt internal 
procedures to remote work, limited number of employees in the 
workplace, increased staff absence due to the need for personal 
childcare during school closures. 
Staff work efficiency
may be reduced due to remote work from 
home, less communication with other coworkers, lower concentration on 
a job due to negative stimuli from the environment (health risk, care for 
family, risk of income reduction and loss of job, troublesome access to 
health care). 
Issues with contractors.
Insurance companies have to face 
possible perturbations in the availability and timeliness of external third