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20th May 2020
COVID-19's economic effects cloud the Outlook for EMEA insurers says S&P Global report
The news for EMEA insurers during 2020 is likely to be dominated by COVID-19-related insurance claims and the revaluation of investments. As the capital markets react to the daily COVID-19 updates, S&P Global Ratings has maintained a stable outlook on most rated insurers based in EMEA. In a report published this week, S&P Global Ratings said it anticipates that EMEA insurers' solid capital positions and broad diversification will continue to protect many of them, and that volatility in their investment exposures will prove a greater risk than increases in insurance liabilities over the next 12 months.
In light of the changing conditions, we have already revised our outlooks for some insurers, partly because they have less robust balance sheets and partly because of their greater exposure to financial market volatility. We predict that insurance losses in EMEA will be concentrated in industrial lines such as event insurance, D&O, and business interruption.
Pandemics are excluded from most business interruption insurance contracts, and in EMEA, we see limited risk that authorities will make retroactive legal changes to these agreements. COVID-19 and related risks and opportunities could, however, affect insurers' balance sheets in 2020 and beyond. Capital market movements are likely to erode some unrealized investment gains, and an additional burden could arise from the rating migrations so far, combined with the expected corporate defaults.
Although we assume some rebound in GDP for most EMEA regions in 2021, we take a cautious approach to any potential financial market recovery; this does not form the basis of our rating decisions. Should capital market volatility worsen, for example, after an unexpectedly long lockdown, we will revisit our assumptions."
S&P Global Trends(521 articles)