A bulletin from A.M. Best notes that the rating agency has “been actively monitoring the financial crisis and its effects on European countries, stress-testing the balance sheets of (re)insurers against their exposure to euro zone debt, equities, real estate and corporate bonds. In 2011, market briefings were released highlighting insurers’ elevated investment risk exposure, and in December, numerous rating actions were taken on members of six global insurance groups.”
As the market environment remains a challenging and “difficult economic environment” for European insurers, Best has “implemented further stress tests on rated companies based on full-year 2011 results.” The June 2012 rating actions, which are summarized separately, reflect Best’s current view of the stresses and challenges faced by European (re)insurers.”
The briefing – A.M. Best Takes Further Rating Actions On Euro Zone Insurers – examines the rationale behind Best’s recent rating changes, and reviews how the financial market dynamics within the euro zone have migrated over the past few months.
Best’s overall view of the market environment for European insurers is largely negative, “as a workable solution to the euro zone crisis continues to be elusive. A Greek withdrawal from the common currency could lead to contagion affecting other asset classes and countries in peripheral Europe, particularly Portugal, Spain and Italy.”
In addition Best’s report points out that the “financial markets have a limited appetite to adopt a wait-and-see approach.” Best said it “expects a continued period of volatile capital markets, particularly with regard to sovereign debt and financial institution securities.”
Source: A.M. Best
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