Recent civil unrest and a ballooning public debt have increased the level of economic uncertainty in Lebanon, negatively impacting the credit quality of the country’s insurance market, says AM Best.
In a new report the ratings agency notes how, in contrast with the wider Middle East and North Africa region, the Lebanese insurance market overall has an asset allocation that favours high levels of cash and fixed income instruments over high-risk instruments.
Nonetheless, analysts say the vast majority of Lebanese insurers’ investments are exposed to domestic issuers, and consequently to the socio-economic and political turmoil the country is experiencing.
Specifically, uncertainties regarding the credit quality of Lebanese government debt pose the most imminent threat to domestic insurers’ balance sheets.
AM Best continues to maintain close contact with the companies it rates in Lebanon and has been able to maintain robust, albeit reduced, levels of risk-adjusted capitalisation.
That said, the increased social, political and economic instability in the country since October 2019 has exacerbated structural market issues that, in AM Best’s view, could further weaken insurers’ balance sheet strength.
“As the situation evolves, AM Best will continue to monitor closely the ability of rated companies to meet their financial obligations as they fall due,” explained AM Best.
