Insurance industry unperturbed by Greece

A Greek exit from the EU would have little effect on re/insurers, rating agency AM Best has claimed.

While the threat of a Greek exit has diminished following the recent $13 billion bailout, the Greek economy remains fragile and the September 20 election outcome is uncertain.

While it notes that some re/insurers have stakes in the Greek non-life sector, the rating agency said the size of the domestic market is too small for any discernible impact to be felt on these firms’ balance sheets.

“Greece’s insurance sector is small compared to that of other European countries such as Italy, Portugal and Spain with total premiums of just €3.96 million ($4.5 million) in 2014.

Given its compact size a contagion effect is unlikely to spread to other European insurance markets,” the report noted.

Standard & Poor’s said this week that the chance of a Greek exit from the eurozone has receded to less than a one-in-three likelihood.

Confirming its junk rating status for the nation, the rating agency added: “The new government, of whatever configuration, will maintain a constructive relationship with its creditors.”

However AM Best did highlight one insurance sector that is coming under increasing strain: credit insurance, which exporters might use as protection against non-payment by a company in Greece.

While noting that credit limits here have been limited since the onset of the financial crisis, it nonetheless noted that the situation has recently become more pronounced.

“The amount of credit insurance available to cover risks emanating from Greek buyers has reduced and is likely to exacerbate Greeks’ difficulty in purchasing foreign goods,” it said.