APAC insurance risks seen as “largely manageable”

“Today, the pandemic-related losses are largely manageable across APAC,” Bennett commented.

“One of the top risks on the horizon is asset volatility which has the potential to affect capital adequacy, and we still see this as a very high-risk factor.”

“The second highest risk is around claims, the highest profile types being business interruption claims and catastrophe claims,” he explained.

“Another risk is increased spending undertaken as a policy response to COVID-19 shutdowns, which can potentially affect credit quality, and that also feeds into the capital adequacy assessments that we undertake.”

Bennett noted that insurer sales have been affected by reduced face-to-face contact over the past year, and says that this trend is likely to continue for APAC insurers. For S&P’s analysis, Bennett says it will be taking a number of different pandemic-related scenarios into account when deciding financial ratings.

“We’ve seen to what extent the market volatility has affected particular asset classes, so we’re looking at investment portfolios as well as the claims impact faced by insurers,” Bennett said.

“That includes both direct claims, such as those for travel, and indirect claims where a policy was not ‘meant’ to cover something, but it has since been captured.”

“We also consider the operational impact, and the impact of the pandemic on employees, distribution channels and sales,” he added. “All of those factors need to be fed into the way we look at companies, their operations and their earnings, and we then need to understand how they’ll respond to particular events.”