LONDON (S&P Global Ratings) Nov. 25, 2024--S&P Global Ratings said today that its new scenario analysis suggests that capital adequacy at about 35% of EMEA's insurers could be sensitive to a prolonged financial market downturn, even though the sector as a whole is likely to prove resilient (see "A Prolonged Financial Market Downturn Would Erode Insurers' Surplus Capital Across EMEA," published today).
Our insurance outlook for the region identified spillover from regional wars, leading to a prolonged downturn in financial markets and persistently elevated inflation, as the top external risk. Applying a hypothetical stress scenario created to test the sector's resilience for one year could see capital adequacy assessments weaken at about a third of the region's insurers, which could put pressure on about 10% of our credit ratings. In aggregate, the sector could lose up to 95% of its capital surplus over the level we consider commensurate with current ratings.
Nevertheless, capital adequacy remains a ratings strength for insurers in EMEA. Even under the stresses we applied in our scenario, the aggregate capital surplus would remain elevated at 166%. Capital sensitivity is important to our ratings analysis, especially when events are changing rapidly. Nonetheless, we generally take a prospective view of capital adequacy, and consider the implications for our ratings over the next two to three years.
This report does not constitute a rating action.
The report is available to RatingsDirect subscribers at www.capitaliq.com. If you are not a subscriber, you may purchase a copy of the report by emailing research_request@spglobal.com. Ratings information can also be found on S&P Global Ratings' public website by using the Ratings search box at www.spglobal.com/ratings. Alternatively, call S&P Global Ratings' Global Client Support Line (44) 20-7176-7176.
| Primary Credit Analyst: | Charles-Marie Delpuech, London + 44 20 7176 7967; charles-marie.delpuech@spglobal.com |
| Secondary Contact: | Volker Kudszus, Frankfurt + 49 693 399 9192; volker.kudszus@spglobal.com |
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