Why well capitalised insurance companies will withstand pandemic effect-AM Best

Initial stress testing conducted by AM Best to gauge the preliminary impact from the COVID-19 pandemic on its rated insurance companies’ financial strength found that most insurers’ capital levels provided an adequate buffer against a potential shock to their balance sheets, Inspenonline can report.

Sensitivity to the pandemic was greater for life/health insurers with high asset and mortality risks; insurers with material exposures to mortgage loans; carriers operating in domiciles in higher country-risk tiers; and companies with smaller capital bases, the agency said.

As detailed in its new Best’s Special Report, “Stress Testing Rated Companies for COVID-19,” the stress test analysis covered approximately 1,400 rating units worldwide, and focused on the impact of COVID-19 on underwriting and assets.

Overall results showed that the median Best’s Capital Adequacy Ratio (BCAR) score at VaR 99.6 of the rated population declined to 43 per cent from an estimated year-end 2019 BCAR of 49 per cent, demonstrating the resilience of the insurance industry.