Leading ratings agencies have moved quickly to publish reassuring assessments of the implications of the war in Ukraine on the insurance industry.
AM Best, Fitch and S&P have all issued a series of bulletins analysing the potential impacts of the war and the growing range of sanctions imposed on Russia and Belarus, writes Contributing Editor David Worsfold.
All agree that the greatest threats are to Russia’s own insurance industry as the country’s financial system is cut off from the rest of the world.
Several major insurers, such as Allianz, Axa, and Uniqa have operations in Russia but S&P Global Ratings believes asset and insurance liability exposure for most of these firms is less than 2% of total adjusted capital or below 1% of total assets and liabilities, or both. It says the overall capital positions of these European insurers are strong and so does not expect invested asset volatility in Russia or local liabilities to lead to negative rating actions.
S&P analysts also say asset exposures are very limited because of the rigorous risk assessments demanded by Solvency II. There could be some exposure to Russian sovereign bonds as well as holdings of corporate or bank bonds. However, S&P believes they are limited to less than 1% of investments for most European insurers.
It has placed some smaller, specialist insurers and reinsurers on credit watch, however.
AM Best has made a similar assessment of the potential exposure of US insurers.
It estimates the largest exposure of any insurer is less than 2% of capital and surplus, with most of these bonds of investment grade NAIC-2. In a commentary entitled US Insurers’ Indirect Exposures to Russia May Be Significant, the agency warns that higher capital charges could result if issues fall below investment grade for an extended period.
It points out that US insurers have little exposure to Russian companies in their stock portfolios, but they will have exposures to companies that derive a share of earnings from Russia and these could be severely impacted if the war drags on.
Fitch Ratings focussed on the likely extent of Russian cyberattacks on businesses and government agencies, with the risk of spill-over cyberattacks against non-primary targets now widespread. It says this includes a heightened risk of attacks on issuers that have conducted business in Russia or Belarus or with their governments.
- Insurance Europe, the pan-European trade body moved quickly to expel the All-Russian Insurance Federation.
It issued a statement stressing the importance of supporting those working in the insurance industry in Ukraine.
“A priority for insurance companies with activities in Ukraine is to take steps to ensure the safety of their employees.
“Representatives from the Ukrainian insurance industry have contacted Insurance Europe to outline ways in which our industry can help to support their efforts, and we have communicated these to the wider European industry through our members, the national insurance associations.
“Many of our members and insurance companies are taking solidarity initiatives to support the Ukrainian people and refugees. Insurance Europe is supporting these efforts by coordinating information-sharing between our members.”