Rating agency AM Best has announced the results of its capital adequacy stress tests as it moves into the second phase of its response to the COVID-19 pandemic.
Outside of the life sectors in Canada and the US, the tests have been generally positive, with most rated re/insurers taking only manageable hits to their BCAR outcomes and capital remaining robust.
Other areas where AM Best observed a greater BCAR stress impact included amongst some smaller insurers and those in CRT-4 and CRT-5 countries.
However, analysts warned that much of the risk to ratings may sit outside the stressed BCAR, even for those whose initial stress-test position was robust.
In particular, AM Best remains interested in how the COVID-19 crisis spotlights re/insurers’ enterprise risk management capabilities and the resilience of business models.
AM Best continues to see COVID-19 as largely an earnings event and not a capital event, although it acknowledged major ongoing uncertainties around loss exposures in some areas of commercial lines.
