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Chuks Udp Okonta
Initial stress testing conducted by AM Best to gauge the preliminary impact from the COVID-19 pandemic on its rated insurance companies’ financial strength found that most insurers’ capital levels provided an adequate buffer against a potential shock to their balance sheets, Inspenonline can report.
Sensitivity to the pandemic was greater for life/health insurers with high asset and mortality risks; insurers with material exposures to mortgage loans; carriers operating in domiciles in higher country-risk tiers; and companies with smaller capital bases, the agency said.
As detailed in its new Best’s Special Report, “Stress Testing Rated Companies for COVID-19,” the stress test analysis covered approximately 1,400 rating units worldwide, and focused on the impact of COVID-19 on underwriting and assets. Overall results showed that the median Best’s Capital Adequacy Ratio (BCAR) score at VaR 99.6 of the rated population declined to 43% from an estimated year-end 2019 BCAR of 49 per cent, demonstrating the resilience of the insurance industry.
Property/casualty insurers in the United States and Canada performed relatively well, compared with life/annuity and health insurers.