Prolonged Economic Sanctions – A Risky Scenario for European Insurers
This commentary discusses the implications for the European insurance sector of Russia’s invasion of Ukraine and the consequent tightening of economic sanctions imposed by the West on Russia.Key highlights include:
• Substantial financial markets volatility observed since the beginning of the war in Ukraine has likely reduced customers’ appetite for unit-linked products and this could adversely affect life premiums and earnings in 2022.
• We see a risk that an extended economic weakness could lead to a deterioration in the quality of insurers’ bond holdings, which in turn could exert downward pressure on European insurers’ solvency ratios.
• The overall direct impact of the conflict and the imposition of sanctions is likely limited. However, some specialty lines such as aviation or cyber insurance could be affected.
“In a scenario of a prolonged conflict with elevated inflation and weak economic growth, P&C insurers could face inflationary pressure on claims and margin squeeze” said Tomasz Walkowicz, Vice President, Global Financial Institutions at DBRS Morningstar.
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.
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