Re/insurers must prepare for further shocks
Europe’s insurers and reinsurers should brace themselves for further economic shocks – despite the period of relative economic stability they have enjoyed in the past year and the important steps many have taken to improve their capital positions, de-risk investment portfolios and re-engineer products.
That is the view of rating agency AM Best in a report. It said that given that no permanent solution has been established to solve the uncertainties in the Eurozone region, it continues to stress the balance sheets of rated entities against a renewed deterioration of the investment markets.
“AM Best expects that companies should be braced for further economic shocks and should ensure risk management practices reflect the potential for volatile markets,” it said in the report, called ‘European Insurers Better Placed, but Must Prepare for Further Economic Shocks’.
Since AM Best last updated the market on its stress tests on October 16, 2012, the economic situation in the Eurozone has become more stable and the financial markets less volatile, notwithstanding the recent market turbulence affecting various asset classes. As such, AM Best expects a period of stable ratings in the current environment.
However, due to its lower financial leverage and lower exposure to investments in Greece, Ireland, Italy, Portugal and Spain, the reinsurance segment was seen to be more resilient and better positioned than the primary insurance segment to absorb any future economic shocks in the Eurozone.
