Swathes of rating changes unlikely for North American P/C insurers
A wide swath of rating movements for North American property/casualty (P/C) insurers due to capital pressure is unlikely, S&P Global Ratings has surmised having completed a stress test on the sector.
The high number of catastrophes in 2017 has brought into question North American property/casualty (P/C) insurers' capital strength at the beginning of 2018. A new report released titled, ‘For North American Property/Casualty Insurers, An Even Tougher Capital Stress Test Still Finds Resilience,’ details the results of a recent stress test the rating agency conducted.
But the insurers tested generally fared well. "To determine how our rated North American P/C insurers stack up now in comparison to our last capital stress test in 2014, we added a third element to our capital tests to form a 'three-tail' scenario," said S&P Global Ratings credit analyst Patricia Kwan.
“Most US P/C insurers continue to show a strong capital buffer under our three-tail stress scenario. Our extreme capital stress test shows less than half of our rated insurers would remain inside a rating category. Results improve to two-thirds remaining in a rating category when they withhold capital returns to shareholders. Ultimately, we believe a wide swath of rating movements due to capital pressure is unlikely.”
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