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<p><strong>By: S&P Global Ratings</strong></p>

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<p>Global insurance ratings have proven resilient during the first wave of the COVID-19 pandemic, as capital strength helped stave off widespread downgrades, according to a report published today by S&P Global Ratings. However, insurers' capital buffers will erode through the second half of the year as financial market losses and insurance claims pile up, particularly for industrial lines re/insurers.</p>

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<p>"The risk of insurers' invested assets losing value still outweighs the risk of rising insurance claims, particularly for life insurers and those with thin capital buffers," said S&P Global Ratings credit analyst Dennis Sugrue.</p>

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<p>"Nevertheless, a second wave of COVID-19 infections that disrupts the economic recovery or necessitates the widespread reintroduction of lockdown measures could disrupt the financial markets further, deepen the recession, and increase asset losses and insurance claims," Mr. Sugrue added.</p>

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<p>Although losses from business interruption could rise if insurers face legal action, we see retroactive legislative or regulatory changes as unlikely. Lawsuits may arise on the back of safety concerns for employees, and these could lead to increased directors and officers liability or professional liability claims. Significant excess mortality due to COVID-19 could erode life insurers' capital positions.</p>

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<p>Our growth expectations for insurers globally in 2020 have diminished as a result of the slowdown in economic activity. Lower investment returns, mark-to-market losses, and heightened claims will erode earnings in 2020. Yet for many sectors, we expect top lines and earnings to recover during 2021-2022 as we expect non-life pricing to continue to improve and demand to remain stable for non-discretionary lines of business. Capital buffers at most insurers are healthy enough to support ratings, particularly those in North America and EMEA.</p>

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<p>So far in 2020, we have taken negative rating actions on 9% of our global insurance ratings, compared to 40% of the wider corporate and government ratings universe. In addition, we have revised downward two Insurance Industry and Country Risk Assessments (IICRAs). About 75% of sectors carry an IICRA of intermediate risk or better, and we see stability in most regions.</p>

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<p>This report does not constitute a rating action.</p>

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