While the economic impact of coronavirus has worsened sharply, analysts at S&P Global Ratings expect insurers will be able to absorb the financial consequences due to a robust capital position and limited exposure to loss-affected lines of business.
That said, analysts expect the situation will exacerbate existing weaknesses and some targeted downgrades or outlook changes over the coming weeks are anticipated.
Life insurers are considered more at risk, particularly those with relatively thin capital buffers and significant exposure to financial market volatility through their asset portfolios or product offerings.
Analysts note that the rate of infection is accelerating globally and the center of the pandemic has shifted from China to Europe and the US.
The World Health Organisation designated the outbreak a pandemic on March 11 and S&P forecast that the global economy will be in recession in 2020 as a result.
The economic disruption associated with the pandemic, combined with the collapse in oil prices and resultant extreme volatility in the capital markets, will have severe implications for global credit markets.
That said, the average rating across the industry is ‘A’, the highest average rating for any corporate or financial services industry we rate.
As with other investment-grade issuers, S&P don’t anticipate widespread downgrades across the industry.
Nevertheless, some ratings will be affected. To date, S&P have downgraded one insurer and placed two insurance ratings on a negative outlook or CreditWatch.
In each case, the implications of COVID-19 had compounded other factors, causing creditworthiness to deteriorate.