Property/casualty insurers’ capital positions should be strong enough to withstand asset losses due to falling markets and expected claims costs amid the global COVID-19 pandemic, according to a webinar presentation Wednesday by Fitch Ratings Inc.

“For most companies, capital should be strong enough to absorb asset losses,” said Keith Buckley, managing director and global group head of insurance for Fitch.

“There will be strain on the asset side of the balance sheet as investments suffer losses” due to ongoing volatility, he said.

Interest rates will also come into play, he said, as they could affect reserving for long-duration products.

Mr. Buckley said claims should be manageable. “Our thinking is claims costs will be an earnings event vs. a capital event,” he said.

Claims in the P/C sector tied to the outbreak will likely add three to four points to the accident year 2020 loss ratio, he said.

There will be direct claims costs tied to the pandemic, including claims on the P/C side for event cancellation, trade credit and business interruption, he said.

Reinsurance markets may see higher rates.

Reinsurers “are likely to continue to have the ability to provide required cover to cedents, but it’s likely to be at a price,” said Harish Gohil, managing director, EMEA regional group head. “They may well want higher premiums for the coverage,” given the pressures on the markets, he said.

Brokers will get a headwind from generally rising P/C rates, but “we definitely expect to see some top-line implications,” said Julie Burke, managing director, North America regional group head, adding the brokerage sector could see earnings pressures

in the wake of the outbreak.

The insurance sector commentary flows from a general baseline scenario for the outbreak that includes a recession at a speed and depth unseen since World War II, characterized by world GDP growth falling to negative 2%, with the U.S. at negative 3%, the U.K and Eurozone at negative 4%, and Chinese growth dropping to about 2% from recent levels closer to 6%, Mr. Buckley said.

There will also be sharp spikes in unemployment and a recovery that starts in the second half of 2020 if the pandemic is contained, but with GDP growth remaining below fourth quarter 2019 levels through most of 2021, he said.

Fitch on March 16 moved its sector outlook to negative from stable for all insurance sectors globally, Mr. Buckley said.

More insurance and risk management news on the coronavirus crisis here.