Life - Articles - Covid19 assessing Life Insurers financial strength ratings

DBRS Morningstar published a commentary titled “Assessing the Impact on Life Insurers' Financial Strength Ratings as the Coronavirus Crisis Unfolds,” which discusses some of the challenges in assessing life insurers’ ratings during the Coronavirus Disease (COVID-19) pandemic, and the potential rating implications.

 The key highlights include:

 (1) The global economic downturn and low-interest rate environment, as well as the heightened equity market volatility, credit default risk, and product risk, could all adversely affect life insurers' ratings.
 (2) In the short term, we are reviewing the factors in the building blocks that assess the risk profile, earnings ability, and capitalization scores.
 (3) The franchise strength and liquidity blocks assessments are not as susceptible to the current shocks; however, depending on the duration and severity of the impact of the coronavirus on the markets where the insurer operates, we will likely adjust the assessment of the remaining building blocks and factors.

 “Looking forward, there will be greater pressure to restore the capitalization building block, as well as an insurers' ability to remedy any significant deterioration within a reasonable time,” said Hema Singh, Vice President from the DBRS Morningstar Global Financial Institutions team.

 “DBRS Morningstar considers that companies with low levels of capital buffers and significant exposure to equity market volatility through their asset portfolio or product portfolios offerings could see their solvency position deteriorate quickly during the coronavirus pandemic.”


 Assessing the Impact on Life Insurers' Financial Strength Ratings as the Coronavirus Crisis Unfolds

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