This article presents S&P Global Ratings' insurance industry and country risk assessments (IICRAs) for 103 insurance sectors covering 53 countries and four global sectors (see tables 2-6). We review these IICRAs by applying our criteria "Insurers Rating Methodology," published July 1, 2019. In addition, the article lists the top key risks of each sector, which we classify in 10 different categories:
Table 1
| Top Key Risks | ||||
|---|---|---|---|---|
| Risk Category | Description | |||
| Investment performance risk | Capturing financial markets risks, including interest rates, mark to market, and asset quality. | |||
| Exposure to high-risk assets | High-risk assets typically include equities (listed and unlisted), real estate, fixed-income investments or deposits in institutions that are rated 'BB+' or lower, and unrated bonds and loans. | |||
| Country risk | Risk factor taking into account considerations such as macroeconomic risk, sovereign rating limitations, geopolitical, and rule of law risks. | |||
| Intense competitive environment | Whether the market is concentrated with a few players or contains a high number of smaller ones, an intense competitive environment could lead to price wars and hurt profitability. | |||
| Muted market growth prospects | The lack of potential for premium growth in a market, either because it is mature or due to adverse macroeconomic conditions, with high inflation resulting in near-zero (or negative) real growth. | |||
| Weak technical results | An industry where technical performance, typically measured by combined ratios (non-life) and return on assets (life) is loss-making. | |||
| Exposure to natural catastrophes | Markets with material exposure to climate risk, notably earthquakes, hurricanes, and other natural disasters. | |||
| Litigious legal system | A sector where litigation often leads to lengthy court cases, increasing the tail of an insurer's liabilities, and consequently, resulting in unpredictable claims settlements. | |||
| Government and regulatory policy risks | Markets exposed to changes in government or regulatory policies, often resulting in material impacts on insurers' business models and/or profitability. | |||
| Foreign exchange impact | Reflects the impact foreign exchange risks could have on profitability. | |||
| Other | Risk classification that does not fit any of the 10 categories described above. | |||
| Where risks do not fit any of these categories, we have selected other. | ||||
Latest Actions
Since our last publication ("Insurance Industry And Country Risk Assessment Update: May 2021," published May 27, 2021), we have:
- Revised our industry risk assessment on the global protection and indemnity (P&I) insurance sector to high, from moderately high. This is mainly due to our forecast of weak profitability prospects for the sector in 2021-2022, together with its poor operating performance track record. In 2019-2020, the sector's combined ratio was well above 100%. The poor performance is due to soft, yet improving, pricing conditions in the P&I sector as well as an increase in the frequency of large claims. The P&I IICRA, however, remains unchanged at intermediate risk.
In this report, we also publish our assessment of the country and industry risks to which insurers are exposed.
About Insurance Industry And Country Risk Assessments
An insurer's business risk profile forms one of the key components of our rating analysis. It measures the risk inherent in the insurer's operations, which affects the sustainable return that may be derived from those operations. The business risk profile is based on our analysis of an insurer's competitive position, modified to incorporate the industry and country risks to which a specific insurer is exposed.
Each IICRA addresses the risks typically faced by all the insurers that operate in a specific industry and country. To determine the IICRA, we apply our "Country Risk Assessment Methodology And Assumptions," published Nov. 19, 2013, to assess country risk, and then modify it according to our view of industry risk. We assess country risk on a scale from strongest (very low risk) to weakest (very high risk).
We assess industry risk on a four-point scale from low to high. Our analysis of industry risk addresses the level, volatility, and sustainability of profitability in a given industry sector. The primary factor in our industry risk analysis is an assessment of prospective profitability, supplemented by a holistic analysis of factors that, in combination, are likely to either support or threaten industry profitability prospects, such as barriers to entry, market growth prospects, product risk, and the institutional framework.
The impact of IICRAs on our ratings varies according to the degree of risk. The higher the risk, the greater the adverse impact on the business risk profile. The risks are categorized as 1-very low, 2-low, 3-intermediate, 4-moderately high, 5-high, or 6-very high.
Within each country, if applicable, we separately assess the life and P/C sectors. Where it has a distinct legal and regulatory framework, we also assess the health sector separately. In addition, in certain countries, we assess the insurance industry and country risk for the bond, mortgage, and title insurance sectors.
Some sectors are more naturally global, because insurers in those sectors typically write business in multiple countries around the world. Consequently, we assess IICRAs globally for life reinsurance, P/C reinsurance, trade credit insurance, and marine protection and indemnity insurance.
Chart 1
Chart 2
Table 2
| Property/Casualty Insurance Industry And Country Risk Assessments On Aug. 31, 2021 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Country Risk | Industry Risk | IICRA | Top Risk 1 | Top Risk 2 | Top Risk 3 | |||||||||
| Angola | Very high | High | Very high | Country risk | Muted market growth prospects | Weak technical results | ||||||||
| Very high | High | Very high | Country risk | Muted market growth prospects | Investment performance risk | |||||||||
| Very low | Low | Low | Exposure to natural catastrophes | Muted market growth prospects | Litigious legal system | |||||||||
| Low | Moderately low | Low* | Intense competitive environment | Investment performance risk | Exposure to natural catastrophes | |||||||||
| High | Moderately high | High | Investment performance risk | Muted market growth prospects | Country risk | |||||||||
| Bahrain | High | Moderately low | Moderately high* | Country risk | Intense competitive environment | Investment performance risk | ||||||||
| Low | Moderately low | Intermediate | Intense competitive environment | Exposure to natural catastrophes | Investment performance risk | |||||||||
| Moderately high | Moderately low | Moderately high | Country risk | Weak technical results | Investment performance risk | |||||||||
| Very low | Moderately low | Low | Exposure to natural catastrophes | Muted market growth prospects | Investment performance risk | |||||||||
| Moderately high | Moderately low | Intermediate* | Intense competitive environment | Exposure to high risk assets | Government and regulatory policy risks | |||||||||
| Moderately high | Moderately high | Moderately high | Weak technical results | Country risk | Intense competitive environment | |||||||||
| Czech Republic | Intermediate | Moderately low | Intermediate | Intense competitive environment | Exposure to natural catastrophes | Country risk | ||||||||
| Very low | Low | Low | Investment performance risk | Exposure to high risk assets | ||||||||||
| Very low | Low | Low | Investment performance risk | Exposure to high risk assets | ||||||||||
| Low | Moderately low | Intermediate | Intense competitive environment | Government and regulatory policy risks | Investment performance risk | |||||||||
| Very low | Moderately low | Low | Intense competitive environment | Investment performance risk | Exposure to natural catastrophes | |||||||||
| Low | Moderately low | Low* | Intense competitive environment | Muted market growth prospects | Government and regulatory policy risks | |||||||||
| Low | Moderately high | Intermediate | Intense competitive environment | Litigious legal system | Exposure to high risk assets | |||||||||
| Intermediate | Moderately low | Intermediate | Investment performance risk | Intense competitive environment | Government and regulatory policy risks | |||||||||
| Moderately high | Moderately low | Intermediate* | Country risk | Government and regulatory policy risks | Muted market growth prospects | |||||||||
| Low | Moderately high | Intermediate | Exposure to high risk assets | Exposure to natural catastrophes | Muted market growth prospects | |||||||||
| High | Moderately high | Moderately high* | Country risk | Weak technical results | Muted market growth prospects | |||||||||
| High | Moderately low | Moderately high* | Country risk | Muted market growth prospects | Investment performance risk | |||||||||
| Kenya | High | High | High | Muted market growth prospects | Weak technical results | Exposure to high risk assets | ||||||||
| Low | Moderately low | Intermediate | Investment performance risk | Weak technical results | Intense competitive environment | |||||||||
| Moderately high | Moderately low | Intermediate* | Government and regulatory policy risks | Exposure to high risk assets | Country risk | |||||||||
| Malaysia | Intermediate | Moderately low | Intermediate | Muted market growth prospects | Intense competitive environment | Government and regulatory policy risks | ||||||||
| Moderately high | Moderately low | Intermediate* | Country risk | Investment performance risk | Foreign exchange impact | |||||||||
| Morocco | Moderately high | Moderately low | Moderately high | Weak technical results | Foreign exchange impact | Investment performance risk | ||||||||
| Very low | Moderately high | Intermediate | Intense competitive environment | Investment performance risk | Exposure to natural catastrophes | |||||||||
| Low | Moderately low | Intermediate | Exposure to natural catastrophes | Intense competitive environment | Government and regulatory policy risks | |||||||||
| Very low | Low | Low | Investment performance risk | Exposure to high risk assets | ||||||||||
| Poland | Moderately high | Moderately low | Moderately high | Intense competitive environment | Country risk | Exposure to natural catastrophes | ||||||||
| Portugal | Intermediate | Moderately low | Intermediate | Weak technical results | Investment performance risk | |||||||||
| Intermediate | Moderately low | Intermediate | Exposure to high risk assets | Intense competitive environment | ||||||||||
| High | Moderately low | Moderately high* | Muted market growth prospects | Investment performance risk | Country risk | |||||||||
| Moderately high | Moderately low | Intermediate* | Country risk | Intense competitive environment | ||||||||||
| Singapore | Very low | Low | Low | Intense competitive environment | Muted market growth prospects | Weak technical results | ||||||||
| Intermediate | Moderately low | Intermediate | Other | Exposure to natural catastrophes | Muted market growth prospects | |||||||||
| Moderately high | Moderately low | Moderately high | Muted market growth prospects | Country risk | Foreign exchange impact | |||||||||
| Intermediate | Low | Low* | Investment performance risk | Other | Government and regulatory policy risks | |||||||||
| Very low | Low | Low | Investment performance risk | Exposure to high risk assets | ||||||||||
| Switzerland | Very low | Low | Very low* | Investment performance risk | Foreign exchange impact | Exposure to natural catastrophes | ||||||||
| Intermediate | Low | Intermediate | Exposure to natural catastrophes | Investment performance risk | Intense competitive environment | |||||||||
| Thailand | Moderately high | Moderately low | Intermediate* | Exposure to natural catastrophes | Intense competitive environment | Muted market growth prospects | ||||||||
| High | Moderately high | High | Weak technical results | Foreign exchange impact | Country risk | |||||||||
| Intermediate | Moderately low | Intermediate | Intense competitive environment | Exposure to high risk assets | Country risk | |||||||||
| Low | Moderately high | Intermediate | Litigious legal system | Government and regulatory policy risks | Intense competitive environment | |||||||||
| Very low | Moderately high | Intermediate | Litigious legal system | Investment performance risk | Exposure to natural catastrophes | |||||||||
| High | High | High | Exposure to high risk assets | Country risk | Government and regulatory policy risks | |||||||||
| *Indicates those where the IICRA is one category lower than the IICRA indicated in table 5 in Insurers Rating Methodology. | ||||||||||||||
Table 3
| Life Insurance Industry And Country Risk Assessments On Aug. 31, 2021 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Country Risk | Industry Risk | IICRA | Top Risk 1 | Top Risk 2 | Top Risk 3 | |||||||||
| Australia | Very low | Moderately low | Low | Weak technical results | Government and regulatory policy risks | Intense competitive environment | ||||||||
| Low | Moderately high | Intermediate | Investment performance risk | Muted market growth prospects | Government and regulatory policy risks | |||||||||
| Low | Moderately high | Intermediate | Investment performance risk | Government and regulatory policy risks | Muted market growth prospects | |||||||||
| Moderately high | Low | Intermediate | Muted market growth prospects | Weak technical results | Investment performance risk | |||||||||
| Very low | Moderately low | Very low* | Investment performance risk | Weak technical results | Country risk | |||||||||
| Moderately high | Moderately low | Intermediate* | Investment performance risk | Exposure to high risk assets | Government and regulatory policy risks | |||||||||
| Moderately high | Moderately high | Moderately high | Investment performance risk | Country risk | Other | |||||||||
| Czech Republic | Intermediate | Moderately Low | Intermediate | Muted market growth prospects | Government and regulatory policy risks | Country risk | ||||||||
| Very low | Moderately high | Intermediate | Investment performance risk | Exposure to high risk assets | Muted market growth prospects | |||||||||
| Very low | Moderately high | Intermediate | Investment performance risk | Exposure to high risk assets | Muted market growth prospects | |||||||||
| Low | Moderately low | Low* | Investment performance risk | Government and regulatory policy risks | Muted market growth prospects | |||||||||
| Very low | Moderately high | Intermediate | Investment performance risk | Government and regulatory policy risks | Muted market growth prospects | |||||||||
| Low | Low | Low | Investment performance risk | Intense competitive environment | Government and regulatory policy risks | |||||||||
| Intermediate | Moderately low | Intermediate | Investment performance risk | Government and regulatory policy risks | Other | |||||||||
| Moderately high | Moderately low | Intermediate* | Country risk | Investment performance risk | Government and regulatory policy risks | |||||||||
| High | Moderately high | High | Investment performance risk | Country risk | Exposure to high risk assets | |||||||||
| Low | Moderately low | Intermediate | Exposure to high risk assets | Investment performance risk | Intense competitive environment | |||||||||
| High | Moderately low | Moderately high* | Investment performance risk | Foreign exchange impact | Country risk | |||||||||
| Low | Moderately high | Intermediate | Weak technical results | Investment performance risk | Intense competitive environment | |||||||||
| Malaysia | Intermediate | Low | Intermediate | Investment performance risk | Muted market growth prospects | Government and regulatory policy risks | ||||||||
| Moderately high | Low | Intermediate | Muted market growth prospects | Investment performance risk | Country risk | |||||||||
| Very low | Moderately high | Intermediate | Investment performance risk | Exposure to high risk assets | Muted market growth prospects | |||||||||
| Low | Low | Low | Muted market growth prospects | Government and regulatory policy risks | Intense competitive environment | |||||||||
| Very low | Moderately high | Intermediate | Investment performance risk | Exposure to high risk assets | Country risk | |||||||||
| Oman | Moderately high | Moderately low | Moderately high | Country risk | Investment performance risk | Muted market growth prospects | ||||||||
| Moderately high | Moderately high | Moderately high | Muted market growth prospects | Litigious legal system | Country risk | |||||||||
| Portugal | Intermediate | Moderately high | Moderately high | Weak technical results | Investment performance risk | Intense competitive environment | ||||||||
| Singapore | Very low | Low | Low | Investment performance risk | Weak technical results | Muted market growth prospects | ||||||||
| Intermediate | Moderately low | Intermediate | Muted market growth prospects | Investment performance risk | Country risk | |||||||||
| Moderately high | Moderately low | Moderately high | Weak technical results | Country risk | Muted market growth prospects | |||||||||
| Intermediate | Moderately low | Intermediate | Other | Country risk | Investment performance risk | |||||||||
| Very low | Moderately high | Intermediate | Investment performance risk | Exposure to high risk assets | ||||||||||
| Switzerland | Very low | Moderately low | Low | Investment performance risk | Government and regulatory policy risks | Forex impact | ||||||||
| Intermediate | Moderately high | Moderately high | Investment performance risk | Foreign exchange impact | Exposure to high risk assets | |||||||||
| Thailand | Moderately high | Moderately low | Intermediate* | Investment performance risk | Weak technical results | Muted market growth prospects | ||||||||
| Low | Moderately low | Low* | Investment performance risk | Intense competitive environment | Country risk | |||||||||
| Very low | Moderately low | Low | Investment performance risk | Weak technical results | Country risk | |||||||||
| Moderately high | Moderately low | Moderately high | Country risk | Muted market growth prospects | Investment performance risk | |||||||||
| *Indicates those where the IICRA is one category lower than the IICRA indicated in table 5 in Insurers Rating Methodology. | ||||||||||||||
Table 4
| Health Insurance Industry and Country Risk Assessments On Aug. 31, 2021 | ||||||
|---|---|---|---|---|---|---|
| Country Risk | Industry Risk | IICRA | Top Risk 1 | Top Risk 2 | Top Risk 3 | |
| Very low | Moderately low | Low | Government and regulatory policy risks | Muted market growth prospects | Intense competitive environment | |
| Moderately high | Moderately high | Moderately high | Muted market growth prospects | Weak technical results | Investment performance risk | |
| Very low | Moderately high | Intermediate | Government and regulatory policy risks | Investment performance risk | Other | |
| Very low | Moderately high | Intermediate | Weak technical results | Government and regulatory policy risks | Exposure to high risk assets | |
| Low | Moderately high | Intermediate | Muted market growth prospects | Weak technical results | Government and regulatory policy risks | |
| Very low | Moderately low | Low | Weak technical results | Government and regulatory policy risks | Intense competitive environment | |
Table 5
| Global Sectors Industry And Country Risk Assessments On Aug. 31, 2021 | ||||||
|---|---|---|---|---|---|---|
| Country risk | Industry Risk | IICRA | Top Risk 1 | Top Risk 2 | Top Risk 3 | |
| Low | Low | Low | Weak technical results | Investment performance risk | Government and regulatory policy risks | |
| Low | High | Intermediate | Weak technical results | Intense competitive environment | ||
| Global Reinsurance Property/Casualty | Low | Moderately high | Intermediate | Litigious legal system | Investment performance risk | Weak technical results |
| Low | Moderately low | Intermediate | Muted market growth prospects | Other | Weak technical results | |
Table 6
| Other Sectors Industry And Country Risk Assessments On Aug. 31, 2021 | ||||||
|---|---|---|---|---|---|---|
| Country Risk | Industry Risk | IICRA | Top Risk 1 | Top Risk 2 | Top Risk 3 | |
| Very low | Moderately high | Intermediate | Weak technical results | Muted market growth prospects | Other | |
| Canada Mortgage Insurance | Very low | Moderately high | Intermediate | Weak technical results | Muted market growth prospects | Other |
| Very low | Moderately high | Intermediate | Country risk | Other | Muted market growth prospects | |
| Very low | Low | Low | Country risk | Muted market growth prospects | ||
| Very low | Low | Low | Muted market growth prospects | |||
Related Criteria
- Insurers Rating Methodology, July 1, 2019
- Country Risk Assessment Methodology And Assumptions, Nov. 19, 2013
Related Research
- Country Risk Assessments Update: August 2021, Aug. 6, 2021
This report does not constitute a rating action.
| Primary Credit Analysts: | Ali Karakuyu, London + 44 20 7176 7301; ali.karakuyu@spglobal.com |
| Mario Chakar, London + 44 20 7176 7070; mario.chakar@spglobal.com | |
| Research Contributor: | Kai B Mirza, London + 44 20 7176 3980; kai.mirza@spglobal.com |
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