Executives at life and health insurers talk all the time about pandemic risk, but Daniel Rabinowitz, an insurance law specialist, questions whether most life and health executives were emotionally prepared for the COVID-19 pandemic.
Property and casualty insurers have good models for analyzing the effects of earthquakes, hurricanes, and other natural disasters Rabinowitz said Friday, in an interview.
In life insurance, “it’s not a frequent thing” for companies to face severe pandemic risk, Rabinowitz said..
Rabinowitz, a partner at Kramer Levin Naftalis & Frankel LLP, helps insurers with acquisitions, financing deals and state capital standards regulations.
Here are five things he’s seeing now, drawn from the interview.
1. Life insurers as a whole appear to have enough cash, and other sources of liquidity, to weather the storm.
“I don’t think that this is an existential thing for life insurers at this point,” Rabinowitz said.
2. State insurance regulators are interested in finding out what’s happening with insurers’ investment portfolios.
One concern, Rabinowitz said, is that insurers might try to make up for poor investment results this year by taking extra risk in the following years.
3. Rabinowitz is not spending a lot of time looking at how regulators and the courts responded to the 1918 influenza pandemic, which killed 600,000 people, or 0.6% of the 1918 U.S. population.
Partly because the financial system has changed so much between 1918 and now, typical participants in the life and health market see the collapse of Lehman Brothers and the aftermath of the Sept. 11, 2001, terrorist attacks as much more relevant examples, Rabinowitz said.
4. .The markets for the kinds of products life insurers typically invest in have functioned reasonably well.,
“I don’t think the credit markets have really seized up,” Rabinowitz said.