S&P Global Ratings announced March 25 that it 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.”
Despite the economic disruption associated with the pandemic, S&P underlined that the average rating across the industry is 'A', which is the highest average rating for any corporate or financial services industry rated. “As with other investment-grade issuers, we don't anticipate widespread downgrades across the industry.
However in the report, COVID-19 Will Test Insurer’s Resilience, the ratings agency says the situation “will exacerbate existing weaknesses and we anticipate some targeted downgrades or outlook changes over the coming weeks as we actively review and stress our insurance ratings.”
To date, S&P has 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,” says S&P. “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.
