Moody’s Investors Service has affirmed SCOR’s Aa3 insurance financial strength rating as well as its debt ratings and the ratings of its subsidiaries.
The outlook has been changed to negative from stable because Moody’s believes the group is more vulnerable than other Aa3 peers in a stress scenario of higher mortality claims arising from the coronavirus pandemic.
The rating action is in response to Moody’s assessment of the possible effects of the coronavirus on SCOR’s credit profile.
Moody’s notes how the coronavirus-related economic downturn is creating a severe and extensive credit shock across many sectors, regions and markets.
The reinsurance sector – and SCOR – has been one of the sectors affected by the shock resulting in a slowdown in business activity and an expected increase in insurance claims.
Moody’s regards the coronavirus pandemic as a social risk under its ESG framework, given the substantial implications for public health and safety.
The affirmation of SCOR’s ratings reflects its very good franchise and market position across Life and Property and Casualty (P&C) reinsurance, its well diversified business profile and lower exposure to the more volatile non-life reinsurance segments than peers, resulting in relatively more stable profitability as well as a strong and stable capitalisation.
Moody’s notes that, should mortality claims develop in line with Moody’s lower-end base scenarios, Moody’s expects SCOR to remain resilient, given the diversity of its business and management actions at the group’s disposal.
However, while most reinsurers have to date only received very limited death claims related to coronavirus, Moody’s expects claims levels to increase, possibly meaningfully in a scenario where infection rate increases from current levels, over the coming quarters.
In addition, over the past three years, SCOR’s profitability has deteriorated slightly as a result of the impact of above average large losses on its financial profile, leaving it with less flexibility to absorb higher losses in a potential stress scenario at its current rating level.