Most insurers will absorb the impact of COVID-19 – S&P

As COVID-19 continues its rapid global spread, the economic impact has worsened sharply. Nevertheless, S&P Global Ratings expects that the insurance industry's robust capital position and limited exposure to loss-affected lines of business will enable most insurers to absorb the impact of financial market volatility and manage the marginal increase in claims.

That said, the situation will exacerbate existing weaknesses and S&P anticipates some targeted downgrades or outlook changes over the coming weeks as it actively reviews its insurance ratings.

S&P said life insurers are more at risk, particularly those with relatively thin capital buffers and significant exposure to financial market volatility through their asset portfolios or product offerings. S&P is retaining its stable outlooks on the life insurance sectors in North America and EMEA, but revising the outlook for the APAC life insurance sector to negative.

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, S&P said.

“That said, average rating across the industry is 'A', the highest average rating for any corporate or financial services industry we rate,” it added. “As with other investment-grade issuers, we don't anticipate widespread downgrades across the industry.

“Nevertheless, some ratings will be affected. To date, we 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.”