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Insurance Industry And Country Risk Assessment Update: November 2020

COMMENTS

U.S. Health Insurers' Credit Quality Will Likely Hold Up In 2021

COMMENTS

U.S. Property/Casualty Insurers Demonstrate Extraordinary Resilience During The Pandemic

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Solid Capital Levels Position U.S. Life Insurers To Withstand A Tough 2021

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The U.K. Treasury's Review Of Solvency II Ahead Of Brexit: Still A Waiting Game For Insurers


Insurance Industry And Country Risk Assessment Update: November 2020

This article presents S&P Global Ratings' insurance industry and country risk assessments (IICRAs) for 103 insurance sectors covering 52 countries and four global sectors (see tables 1-5). We review these IICRAs by applying our criteria "Insurers Rating Methodology," published July 1, 2019. In addition, the article lists the top key risks of each sector, which we classify in 10 different categories:

  • Investment performance risk;
  • Exposure to high-risk assets;
  • Country risk;
  • Intense competitive environment;
  • Muted market growth prospects;
  • Weak technical results;
  • Exposure to natural catastrophes;
  • Litigious legal system;
  • Government and regulatory policy risks; and
  • Foreign exchange impact

Where some risks do not fit any of these categories, we have selected "other".

Latest Actions

Since our most recent publication ("Insurance Industry And Country Risk Assessment Update: August 2020," published Aug. 10, 2020), we have:

Revised Portugal's property/casualty (P/C) IICRA to intermediate from moderately high risk following a revision of our industry risk assessment to moderately low from moderately high. The sector has structurally improved its profitability metrics to satisfactory levels since 2018. Although the sector's solvency ratios still rely on transitional measures, they have also improved in recent years. We expect the sector's performance to remain resilient in 2020-2021, despite the negative impact of the COVID-19 pandemic, because Portuguese P/C insurers have only limited exposure to claims related to the pandemic or lockdowns.

In this report, we also publish our assessment of the country and industry risks to which insurers are exposed.

About Insurance Industry And Country Risk Assessments

An insurer's business risk profile forms one of the key components of our rating analysis. It measures the risk inherent in the insurer's operations, which affects the sustainable return that may be derived from those operations. The business risk profile is based on our analysis of an insurer's competitive position, modified to incorporate the industry and country risks to which a specific insurer is exposed.

Each IICRA addresses the risks typically faced by all the insurers that operate in a specific industry and country. To determine the IICRA, we apply our "Country Risk Assessment Methodology And Assumptions," published Nov. 19, 2013, to assess country risk, and then modify it according to our view of industry risk. We assess country risk on a scale from strongest (very low risk) to weakest (very high risk).

We assess industry risk on a four-point scale from low to high. Our analysis of industry risk addresses the level, volatility, and sustainability of profitability in a given industry sector. The primary factor in our industry risk analysis is an assessment of prospective profitability, supplemented by a holistic analysis of factors that, in combination, are likely to either support or threaten industry profitability prospects, such as barriers to entry, market growth prospects, product risk, and the institutional framework.

The impact of IICRAs on our ratings varies according to the degree of risk. The higher the risk, the greater the adverse impact on the business risk profile. The risks are categorized as 1-very low, 2-low, 3-intermediate, 4-moderately high, 5-high, or 6-very high.

Within each country, if applicable, we separately assess the life and P/C sectors. Where it has a distinct legal and regulatory framework, we assess the health sector separately. In addition, in certain countries, we assess the insurance industry and country risk for the bond, mortgage, and title insurance sectors.

Some sectors are more naturally global, because insurers in those sectors typically write business in multiple countries around the world. Consequently, we assess IICRAs globally for life reinsurance, P/C reinsurance, trade credit insurance, and marine protection and indemnity insurance.

Chart 1

Chart 2

Table 1

Property/Casualty Insurance Industry And Country Risk Assessments On Aug. 10, 2020
Country Risk Industry Risk IICRA Top Risk 1 Top Risk 2 Top Risk 3
Angola Very high High Very high risk Forex impact Muted market growth prospects Investment performance risk

Argentina

Very high High Very high risk Weak technical results Country risk Muted market growth prospects

Australia

Very low Low Low risk Exposure to natural catastrophes Muted market growth prospects Investment performance risk

Austria

Low Moderately low Low risk* Intense competitive environment Exposure to natural catastrophes Investment performance risk

Azerbaijan

High Moderately high High risk Investment performance risk Muted market growth prospects Country risk
Bahrain High Moderately low Moderately high risk* Country risk Intense competitive environment Investment performance risk

Belgium

Low Moderately low Intermediate risk Intense competitive environment Exposure to natural catastrophes Investment performance risk

Brazil

Moderately high Moderately low Moderately high risk Muted market growth prospects Country risk Investment performance risk

Canada

Very low Moderately low Low risk Muted market growth prospects Exposure to natural catastrophes Investment performance risk

China

Moderately high Moderately low Intermediate risk* Intense competitive environment Exposure to high risk assets Weak technical results

Colombia

Moderately high Moderately high Moderately high risk Weak technical results Country risk Muted market growth prospects
Czech Republic Intermediate Moderately low Intermediate risk Government and regulatory policy risks Intense competitive environment Exposure to natural catastrophes

Denmark

Very low Low Low risk Investment performance risk Exposure to high risk assets

Finland

Very low Low Low risk Investment performance risk Exposure to high risk assets

France

Low Moderately low Intermediate risk Intense competitive environment Government and regulatory policy risks Investment performance risk

Germany

Very low Moderately low Low risk Intense competitive environment Exposure to natural catastrophes Investment performance risk

Hong Kong

Low Moderately low Low risk* Intense competitive environment Muted market growth prospects Government and regulatory policy risks

Ireland

Low Moderately high Intermediate risk Litigious legal system Intense competitive environment Exposure to high risk assets
Israel Intermediate Moderately low Intermediate risk Investment performance risk Intense competitive environment Government and regulatory policy risks

Italy

Moderately high Moderately low Intermediate risk* Country risk Government and regulatory policy risks

Japan

Low Moderately high Intermediate risk Exposure to high risk assets Exposure to natural catastrophes Muted market growth prospects
Jordan High Moderately low Moderately high risk* Country risk Weak technical results

Kazakhstan

High Moderately low Moderately high risk* Country risk Muted market growth prospects Investment performance risk
Kenya High High High risk Forex impact Weak technical results Exposure to high risk assets

Korea

Low Moderately low Intermediate risk Investment performance risk Weak technical results Intense competitive environment

Kuwait

Moderately high Moderately low Intermediate risk* Government and regulatory policy risks Exposure to high risk assets Country risk
Malaysia Intermediate Moderately low Intermediate risk Muted market growth prospects Intense competitive environment Government and regulatory policy risks

Mexico

Moderately high Moderately low Intermediate risk* Country risk Investment performance risk Forex impact
Morocco Moderately high Moderately low Moderately high risk Weak technical results Forex impact Investment performance risk

Netherlands

Very low Moderately high Intermediate risk Intense competitive environment Exposure to natural catastrophes Investment performance risk

New Zealand

Low Moderately low Intermediate risk Exposure to natural catastrophes Investment performance risk Muted market growth prospects

Norway

Very low Low Low risk Investment performance risk Exposure to high risk assets
Poland Moderately high Moderately low Moderately high risk Intense competitive environment Country risk Exposure to natural catastrophes
Portugal Intermediate Moderately low Intermediate risk Weak technical results Investment performance risk

Qatar

Intermediate Moderately low Intermediate risk Exposure to high risk assets Weak technical results Country risk

Russia

High Moderately high High risk Muted market growth prospects Country risk Investment performance risk

Saudi Arabia

Moderately high Moderately low Intermediate risk* Country risk Intense competitive environment Government and regulatory policy risks
Singapore Very low Low Low risk Intense competitive environment Muted market growth prospects Weak technical results

Slovenia

Intermediate Moderately low Intermediate risk Other Exposure to natural catastrophes Muted market growth prospects

South Africa

Moderately high Moderately low Moderately high risk Muted market growth prospects Country risk Forex impact

Spain

Intermediate Low Low risk* Investment performance risk Other Government and regulatory policy risks

Sweden

Very low Low Low risk Investment performance risk Exposure to high risk assets
Switzerland Very low Low Very low risk* Other Forex impact Investment performance risk

Taiwan

Intermediate Low Intermediate risk Exposure to natural catastrophes Investment performance risk Intense competitive environment
Thailand Moderately high Moderately low Intermediate risk* Exposure to natural catastrophes Intense competitive environment Muted market growth prospects
Turkey High Moderately high High risk Weak technical results Forex impact Country risk

United Arab Emirates

Intermediate Moderately low Intermediate risk Exposure to high risk assets Intense competitive environment Country risk

U.K.

Low Moderately high Intermediate risk Litigious legal system Government and regulatory policy risks Country risk

U.S.

Very low Moderately high Intermediate risk Litigious legal system Investment performance risk Exposure to natural catastrophes
*Indicates those where the IICRA is one category lower than the IICRA indicated in table 5 in Insurers Rating Methodology.

Table 2

Life Insurance Industry And Country Risk Assessments On Aug. 10, 2020
Country Risk Industry Risk IICRA Top Risk 1 Top Risk 2 Top Risk 3
Australia Very low Moderately low Low risk Weak technical results Government and regulatory policy risks Intense competitive environment

Austria

Low Moderately high Intermediate risk Country risk Investment performance risk Muted market growth prospects

Belgium

Low Moderately high Intermediate risk Investment performance risk Government and regulatory policy risks

Brazil

Moderately high Low Intermediate risk Muted market growth prospects Country risk Investment performance risk

Canada

Very low Moderately low Very low risk* Country risk Investment performance risk Weak technical results

China

Moderately high Moderately low Intermediate risk* Investment performance risk Exposure to high risk assets Weak technical results

Colombia

Moderately high Moderately high Moderately high risk Investment performance risk Country risk Muted market growth prospects
Czech Republic Intermediate Low Intermediate risk Government and regulatory policy risks Muted market growth prospects Country risk

Denmark

Very low Moderately high Intermediate risk Investment performance risk Exposure to high risk assets

Finland

Very low Moderately high Intermediate risk Investment performance risk Exposure to natural catastrophes

France

Low Moderately low Low risk* Investment performance risk Government and regulatory policy risks Investment performance risk

Germany

Very low Moderately high Intermediate risk Country risk Investment performance risk

Hong Kong

Low Low Low risk Other Investment performance risk Weak technical results
Israel Intermediate Moderately low Intermediate risk Investment performance risk Other

Italy

Moderately high Moderately low Intermediate risk* Country risk Investment performance risk
Jamaica High Moderately high High risk Investment performance risk Country risk Government and regulatory policy risks

Japan

Low Moderately low Intermediate risk Exposure to high risk assets Investment performance risk Intense competitive environment

Kazakhstan

High Moderately low Moderately high risk* Investment performance risk Forex impact Country risk

Korea

Low Moderately high Intermediate risk Investment performance risk Weak technical results Intense competitive environment
Malaysia Intermediate Low Intermediate risk Investment performance risk Muted market growth prospects Government and regulatory policy risks

Mexico

Moderately high Low Intermediate risk Muted market growth prospects Investment performance risk Country risk

Netherlands

Very low Moderately high Intermediate risk Investment performance risk Exposure to high risk assets Muted market growth prospects

New Zealand

Low Low Low risk Muted market growth prospects Government and regulatory policy risks Intense competitive environment

Norway

Very low Moderately high Intermediate risk Investment performance risk Exposure to high risk assets Country risk
Oman Moderately high Moderately low Moderately high risk Country risk Investment performance risk Muted market growth prospects
Poland Moderately high Moderately high Moderately high risk Country risk Litigious legal system Muted market growth prospects
Portugal Intermediate Moderately high Moderately high risk Weak technical results Investment performance risk Intense competitive environment
Singapore Very low Low Low risk Investment performance risk Weak technical results Muted market growth prospects

Slovenia

Intermediate Moderately low Intermediate risk Country risk Muted market growth prospects Investment performance risk

South Africa

Moderately high Moderately low Moderately high risk Muted market growth prospects Country risk Investment performance risk

Spain

Intermediate Moderately low Intermediate risk Other Country risk Investment performance risk

Sweden

Very low Moderately high Intermediate risk Investment performance risk Exposure to high risk assets
Switzerland Very low Moderately low Low risk Forex impact Investment performance risk

Taiwan

Intermediate Moderately high Moderately high risk Investment performance risk Forex impact Muted market growth prospects
Thailand Moderately high Moderately low Intermediate risk* Investment performance risk Weak technical results Muted market growth prospects

U.K.

Low Moderately low Low risk* Investment performance risk Intense competitive environment Country risk

U.S.

Very low Moderately low Low risk Investment performance risk Weak technical results Country risk
Uruguay Moderately high Moderately low Moderately high risk Country risk Muted market growth prospects Investment performance risk
*Indicates those where the IICRA is one category lower than the IICRA indicated in table 5 in Insurers Rating Methodology.

Table 3

Health Insurance Industry and Country Risk Assessments On Aug. 10, 2020
Country Risk Industry Risk IICRA Top Risk 1 Top Risk 2 Top Risk 3
Australia Very low Low Low risk Government and regulatory policy risks Muted market growth prospects Weak technical results
Brazil Moderately high Moderately high Moderately high risk Weak technical results Muted market growth prospects Country risk

Germany

Very low Moderately high Intermediate risk Country risk Investment performance risk Investment performance risk

Netherlands

Very low Moderately high Intermediate risk Weak technical results Country risk Exposure to high risk assets

New Zealand

Low Moderately high Intermediate risk Muted market growth prospects Weak technical results Intense competitive environment
South Africa Moderately high Moderately high Moderately high risk Muted market growth prospects Country risk Forex impact
U.S. Very low Moderately low Low risk Weak technical results Government and regulatory policy risks Intense competitive environment

Table 4

Global Sectors Industry And Country Risk Assessments On Aug. 10, 2020
Country risk Industry Risk IICRA Top Risk 1 Top Risk 2 Top Risk 3
Global Reinsurance Life Low Low Low risk Weak technical results Investment performance risk Government and regulatory policy risks

Global Protection And Indemnity

Low Moderately high Intermediate risk Weak technical results Intense competitive environment
Global Reinsurance Property/Casualty Low Moderately high Intermediate risk Litigious legal system Investment performance risk Weak technical results
Global Trade Credit Low Moderately low Intermediate risk Weak technical results Other Muted market growth prospects

Table 5

Other Sectors Industry And Country Risk Assessments On Aug. 10, 2020
Country Risk Industry Risk IICRA Top Risk 1 Top Risk 2 Top Risk 3

Australia Mortgage Insurance

Very low Moderately high Intermediate Weak technical results Muted market growth prospects Other
Canada Mortgage Insurance Very low Moderately high Intermediate Country risk Muted market growth prospects Other
U.S. Mortgage Insurance Very low Moderately high Intermediate risk Country risk Other Muted market growth prospects

U.S. Bond Insurance

Very low Low Low risk Country risk Muted market growth prospects Investment performance risk

U.S. Title Insurance

Very low Moderately low Low risk Weak technical results Muted market growth prospects Investment performance risk

Related Criteria

Related Research

This report does not constitute a rating action.

Primary Credit Analysts: Ali Karakuyu, London + 44 20 7176 7301;
ali.karakuyu@spglobal.com
Mario Chakar, London (44) 20-7176-7070;
mario.chakar@spglobal.com
Research Contributor: Kai B Mirza, London + 44 20 7176 3980;
kai.mirza@spglobal.com

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