AM Best has moved its Country Risk Tier for Russia to a CRT-5 from a CRT-4 to reflect the significantly heightened geopolitical, economic and financial system risk in the country which has resulted from its invasion of Ukraine.
Because of sanctions against Russia having targeted the financial system, it now faces a deeply challenging and unpredictable operating environment for insurers as a result.
Volatility in capital and currency markets has increased liquidity risks. Additionally, capital controls and the impact from sanctions will negatively affect cross-border payments.
AM Best determines country risk levels by assessing country specific factors that could adversely affect an insurer’s ability to meet its financial obligations.
Country risk is evaluated and factored into all AM Best ratings. As part of evaluating country risk, AM Best identifies the various factors within a country that may directly or indirectly affect an insurance company.
Countries are place into one of five tiers, ranging from CRT-1 (Country Risk Tier 1) – denoting a stable environment with the least amount of risk – to CRT-5 (Country Risk Tier 5) – for countries that pose the most risk, and therefore, the greatest challenge to an insurer’s financial stability, strength and performance.
The Country Risk Tier of CRT-5 for Russia reflects very high levels of economic, political and financial system risk.
AM Best has also warned that US insurers and reinsurers face “significant” exposure to the economic fallout of sanctions placed on Russia, following its widely-condemned invasion of Ukraine.
The Russian economy has already been greatly disrupted, with the ruble crashing as much as 30%, with the central bank more than doubling its base interest rate to 20%, among other measures enacted to try to keep money inside Russia.
