Bank Run Scenario Unlikely To Hit Canada's Lifecos But Impacts May Arise From Broader Market Panic
DBRS Morningstar published a commentary discussing the impact of unrealized investment losses on Canadian life insurance companies’ balance sheets and solvency levels in the context of rising interest rates.Key highlights include the following:
-- Canadian insurers' unrealized losses are considered insignificant in relation to their invested assets as a result of asset-liability matching and accounting measurement that provides for a largely offsetting movement in liabilities.
-- Insurance liabilities are more liquid for certain life insurance products that have a savings or investment component.
-- While a potential run on insurance companies is unlikely, heightened market volatility and negative sentiment may have broader macroeconomic and financial market implications with potential negative effects on Canadian insurers.
“Offsetting changes in actuarial liabilities act to mitigate the impact of interest rate movements on invested assets of Canadian insurers. The remaining unrealized losses flow through other comprehensive income, but they are insignificant relative to the value of their invested assets” said Nadja Dreff, SVP, Head of Canadian Insurance. “In our view, a potential run on Canadian insurance companies is unlikely. Insurers’ capital position remains robust and is reflective of any unrealized losses. We will continue to closely monitor the situation.”
Great-West Lifeco is a financial services holding company with interests in the life insurance, health insurance, retirement savings, investment management and reinsurance businesses. Co. has operations in Canada, the United States, Europe and Asia through The Great-West Life Assurance Company, London Life Insurance Company, The Canada Life Assurance Company, Great-West Life & Annuity Insurance Company and Putnam Investments, LLC. Co., through its operating subsidiaries, provides protection and savings products that are distributed through multiple sales channels. Products are marketed under the Great-West Life, London Life and Canada Life brands.
Manulife Financial is a provider of financial protection and wealth management products and services, including individual life insurance, group life and health insurance, long-term care insurance, pension products, annuities and mutual funds to individual and group customers in Asia, Canada and the United States. Co. also provides investment management services with respect to Co.'s general fund assets, segregated fund assets, mutual funds, and to institutional customers. Co. also offers reinsurance services, specializing in property and aviation catastrophe risk reinsurance products.
Sun Life Financial is a holding company. Through its subsidiaries, Co. is an international financial services organization providing a range of protection and wealth accumulation products and services to individuals and corporate customers in Canada, the U.S., the U.K., Ireland, Hong Kong, the Philippines, Japan, Indonesia, India, China, Australia, Singapore, Vietnam and Bermuda. Co. manages its operations in four business segments: Sun Life Financial Canada, Sun Life Financial United States, MFS Investment Management and Sun Life Financial Asia.
DBRS Morningstar is a global credit ratings business with 700 employees in eight offices globally. DBRS and Morningstar Credit Ratings are committed to empowering investor success, serving the market through leading-edge technology and raising the bar for the industry.
Together, we are the world’s fourth largest credit ratings agency and a market leader in Canada, the U.S. and Europe in multiple asset classes. We rate more than 2,600 issuers and 54,000 securities worldwide and are driven to bring more clarity, diversity and responsiveness to the ratings process. Our approach and size provide the agility to respond to customers’ needs, while being large enough to provide the necessary expertise and resources. For more details visit us at dbrs.com.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.