S&P Global Ratings has maintained its stable outlooks on most rated insurers based in the EMEA region, but has warned that COVID-19 induced economic volatility may test balance sheet strength over the coming months.
The rating agency anticipates that EMEA insurers’ solid capital positions and broad diversification will continue to protect many of them, and that volatility in their investment exposures will prove a greater risk than increases in insurance liabilities over the next year.
In light of the changing conditions, S&P has already revised its outlooks for some insurers, partly because they have less robust balance sheets and partly because of their greater exposure to financial market volatility.
It predicts that insurance losses in EMEA will be concentrated in industrial lines such as event insurance, D&O, and business interruption.
Capital market movements are likely to erode some unrealized investment gains, and an additional burden could arise from the rating migrations so far, combined with the expected corporate defaults.
Although S&P assumes some rebound in GDP for most EMEA regions in 2021, it noted that significant uncertainty remains about the spread of the virus, as well as individual countries’ responses to it.
Should capital market volatility worsen, for example, after an unexpectedly long lockdown, analysts said they would revisit assumptions.
