AM Best to stress test insurers on pandemic

Ratings agency AM Best is developing stress testing to gauge the impact of the COVID-19 virus fallout on insurers risk-adjusted capital levels, investment portfolios and reserve adequacy.

AM Best commented that the direct and indirect effects of the outbreak may not be understood fully for some time but said it believed the insurance industry is “more resilient today to financial market downturns than it was during the 2008-2009 financial crisis”. That crisis put heavy attention on liquidity risk.

In a statement the agency said: “At this time, rated companies are expected to be able to meet their commitments, despite the rapidly evolving situation. With these coming stress tests, access to liquidity, as well as the laddering and maturing of debt securities within the capital structures of insurance companies, will be additional areas of focus."

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