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COVID-19: North American life insurers’ risks are escalating

By Charles Mathieu | March 31 2020 02:04PM

Photo: Freepik

North America’s life insurers are facing “escalating” risks because of the COVID-19 pandemic according to S&P Global Ratings. The ratings agency hosted a webcast on March 30 during which it described the impact of the pandemic on the global insurance industry. It also published a report, titled Assessing The Top Risks COVID-19 Poses To North American Life Insurers, four days earlier.

The COVID-19 pandemic has escalated risks for North American life insurers, namely asset risk, equity market volatility, near-zero interest rates, and heightened mortality risk,” said S&P in the report.

Nevertheless, S&P said the outlook for the sector remains stable. We believe that the majority of North American life insurers are well-positioned to handle the immediate impact of COVID-19, particularly from the increase in corporate bond downgrades and moderate pandemic risk, given their buildup of solid capital buffers and liquidity.”

P&C insurers’ outlook stable as well

The outlook of the P&C industry in North America remains stable for the moment, but some factors can quickly trigger an outlook review according to Tracy Dolin-Benguigui, director and sector lead for S&P Global Ratings.

During the webcast, she said that a “perfect storm” scenario, composed of a “sizable catastrophe event”, a “spike in inflation”, “silent”coverages that could change risk perception and “greater equity market volatility”, could have a major impact on the outlook.

Globally, according to a another report published by the S&P, the actual economic situation could result in downgrades and outlook reviews, but the 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”.

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