Global financial services ratings agency, Fitch Ratings, has placed Coface on Rating Watch Negative amid expectations that the trade credit insurance industry will be negatively impacted by the ongoing COVID-19 coronavirus pandemic.
According to Fitch, the impacts and uncertainty being created by the virus outbreak means that it is now more likely that Coface’s profitability will fall below the level required for the current rating.
Fitch adds that the trade credit insurer’s solvency remains robust, and combined with its strong pricing and risk management capacity, will lower the impact of the economic crisis on Coface’s claims experience.
The ratings agency further notes that during previous crisis, the credit insurance sector has shown its resilience and experienced a fairly quick rebound in profitability.
At the end of 2019, Coface had a solvency ratio of 190%, which is above its target range of 155% to 175%. Fitch adds that during the very early stage of the crisis, Coface significantly de-risked its investment portfolio, which is currently comprised of 22% liquidity compared to around 7% as at the end of 2019.
“The fall in the financial markets has therefore not caused a reduction in solvency greater than the sensitivities communicated by the group,” says Fitch.
Earlier this week, A.M. Best warned that COVID-19 could result in some significant losses for trade credit insurers. The following day, Moody’s revised its outlook for several trade credit insurers from stable to negative owing to the impacts of the coronavirus pandemic.
