Kathmandu. International rating agency, AM Best, has said that the volatility in the stock and debenture markets in recent days in the global financial market, along with the pressure on balance sheets, may have some impact on the insurer’s credit valuation.
The agency for evaluating the financial strength of the insurance industry has put the impact of the insurance rate in “credit negative”, but it has not made public any fresh view of the insurer’s valuation. Its observation of the stock and debt markets before a 90-day break of proposed rates has allowed it to conduct risk assessments in public issues.
“Public issues of insurance companies have financial risks – especially for property and disaster insurers – whose decline will lead to unrealistic losses and, ultimately, a decline in capital,” Said Sridhar Manyem, senior director at AM Best, about the scenario of re-imposition of insurance rates mentioned on April 2. “There are 166 property and disaster insurers, more than 25 per cent of whose assets are invested in the share capital. “
A.M. Best warned that the Trump administration’s tariffs could lead to inflationary pressures that could weaken reserves from unexpected increases in deficit costs across multiple coverage lines, such as trade debt, political risk, maritime and supply chains. Demand for emergency trade disruptions and supply chain insurance has risen since events such as Thailand’s floods and the COVID-19 pandemic in 2011, and tariffs are “likely to disrupt global supply chains due to high prices, production shortages and bankruptcy.” “
In a special report titled “Challenges from Insurance Rate Uncertainty to Potential Credit Negative Insurers,” the valuation agency said, “AM BEST is evaluating how the impact of fees flows on financial statements, particularly market volatility or stress on insurance company balance sheets.”
