NEW YORK (S&P Global Ratings) March 7, 2022--S&P Global Ratings today said that it has taken negative rating actions on its rated Russian insurers. The rating actions reflect our view of the heightened likelihood of financial and business vulnerability caused by rapidly escalating geopolitical and economic risks in Russia. The rating actions follow the downgrade and negative CreditWatch placement on the Russian sovereign on March 3, 2022 (see "Russia Ratings Lowered To 'CCC-' And Kept On CreditWatch Negative On Increasing Risk Of Default," published on RatingsDirect).
The rating actions include the following:
- We lowered to 'CCC+' and placed on CreditWatch developing the ratings on Alfastrakhovanie OAO, Energogarant PJSIC, Ingosstrakh Insurance Co., Lexgarant Insurance Co. Ltd., Insurance Co. RESO-GARANTIA and its non-operating holding company Stanpeak Ltd., Sogaz Insurance, and VSK Insurance JSC. This reflects the combination of the lowering of the sovereign credit rating on Russia, the negative CreditWatch placement on Russia, and the ability of the insurers to withstand a short-term stress.
- We lowered the ratings on Sberbank Insurance LLC to 'CCC-', placed the ratings on CreditWatch negative, and then withdrew them at the issuer's request. The downgrade and CreditWatch negative placement reflect the combination of the lowering of the sovereign credit rating on Russia, the negative CreditWatch placement on Russia, and the pressure on Sberbank group's creditworthiness.
Russia's military conflict with Ukraine has prompted a new round of G7 government sanctions that we believe will likely substantially increase the risk of sovereign default. The sanctions also imposed restrictions that deny or significantly diminish the access of the Russian banking system to the global financial system, markets, and infrastructure. We believe these risks could permeate into the Russian insurance and reinsurance sector and potentially pose challenges related to insurers' ability to access global markets or to meet financial commitments.
Russian insurers are facing escalating uncertainty regarding potential operational or financial restrictions and access to liquidity, making them vulnerable to deterioration in economic or geopolitical conditions. We consider the impact of recent sanctions and possible additional ones could further intensify volatility in domestic markets and the local currency, or limit access to international markets and currencies, which in turn could erode the profitability, liquidity, and capital positions of domestic insurers.
That said, we believe that the insurers will likely be able to meet their financial commitments over the near term, thanks to low leverage on balance sheets, their current ability to transact with international markets, and potential domestic reinsurance backstop facilities. We also note some favorable factors such as geographical diversity of operations, deposits in foreign banks that can be used to pay foreign obligations, and insurers' ability to access domestic assets to pay for local obligations.
Lexgarant, in particular, benefits from its focus on international business and its foreign currency deposits outside Russia. We however believe the risks for Lexgarant relate more to potentially progressing sanctions, which may prohibit it from accessing the international insurance market considering its concentration on international aviation business.
For these reasons, the ratings on all the above-mentioned insurers (with the exception of Sberbank Insurance) are above the Russian sovereign ratings. Considering Sberbank group's wider integration with the domestic economy, we believe its creditworthiness is more influenced by sovereign-related risks compared to the other insurers. As a result, we have lowered the ratings on Sberbank Insurance to the same level as the sovereign ratings and we are withdrawing the ratings at the issuer's request.
CreditWatch
The CreditWatch placements reflect our opinion that increased geopolitical and economic risks in Russia will weigh on insurers' creditworthiness. The developing implications of the CreditWatch indicate the likelihood of additional positive or negative rating actions on all, or some, Russian insurers within the next 90 days.
We aim to resolve the CreditWatch once we have obtained sufficient information on the risks involved, whether they will materialize, and their likely impact.
Related Criteria
- General Criteria: Hybrid Capital: Methodology And Assumptions, March 2, 2022
- Criteria | Financial Institutions | Banks: Banking Industry Country Risk Assessment Methodology And Assumptions, Dec. 9, 2021
- Criteria | Financial Institutions | General: Financial Institutions Rating Methodology, Dec. 9, 2021
- General Criteria: Environmental, Social, And Governance Principles In Credit Ratings, Oct. 10, 2021
- General Criteria: Group Rating Methodology, July 1, 2019
- Criteria | Financial Institutions | General: Risk-Adjusted Capital Framework Methodology, July 20, 2017
- General Criteria: Methodology For Linking Long-Term And Short-Term Ratings, April 7, 2017
- General Criteria: Rating Government-Related Entities: Methodology And Assumptions, March 25, 2015
- General Criteria: Ratings Above The Sovereign--Corporate And Government Ratings: Methodology And Assumptions, Nov. 19, 2013
- General Criteria: Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings, Oct. 1, 2012
- General Criteria: Principles Of Credit Ratings, Feb. 16, 2011
Related Research
- Bulletin: Credit Quality Of Insurers Is Weathering The Geopolitical Storm, March 4, 2022
- Russia Ratings Lowered To 'CCC-' And Kept On CreditWatch Negative On Increasing Risk Of Default, March 3, 2022
- Negative Rating Actions Taken On Russian Insurers On Heightened Geopolitical And Economic Risks, Feb. 28, 2022
Ratings List
| * * * * * * * * * * * * * * AlfaStrakhovanie PLC * * * * * * * * * * * * * | ||||||
| Downgraded; CreditWatch Action | ||||||
|---|---|---|---|---|---|---|
| To | From | |||||
|
AlfaStrakhovanie PLC |
||||||
| Financial Strength Rating | CCC+/Watch Dev/-- | BBB-/Watch Neg/-- | ||||
| * * * * * * * * * * * * * * Energogarant PJSIC * * * * * * * * * * * * * * | ||||||
| Downgraded; CreditWatch Action | ||||||
| To | From | |||||
|
Energogarant PJSIC |
||||||
| Issuer Credit Rating | CCC+/Watch Dev/-- | BB/Watch Neg/-- | ||||
| Financial Strength Rating | CCC+/Watch Dev/-- | BB/Watch Neg/-- | ||||
| * * * * * * * * * * * * * * * * Sogaz Insurance * * * * * * * * * * * * * * * | ||||||
| Downgraded; CreditWatch Action | ||||||
| To | From | |||||
|
Sogaz Insurance |
||||||
| Issuer Credit Rating | CCC+/Watch Dev/-- | BBB-/Watch Neg/-- | ||||
| Financial Strength Rating | CCC+/Watch Dev/-- | BBB-/Watch Neg/-- | ||||
| * * * * * * * * * * * * Ingosstrakh Insurance Co. * * * * * * * * * * * * | ||||||
| Downgraded; CreditWatch Action | ||||||
| To | From | |||||
|
Ingosstrakh Insurance Co. |
||||||
| Issuer Credit Rating | CCC+/Watch Dev/-- | BBB-/Watch Neg/-- | ||||
| Financial Strength Rating | CCC+/Watch Dev/-- | BBB-/Watch Neg/-- | ||||
| * * * * * * * * * * * * Lexgarant Insurance Co. Ltd. * * * * * * * * * * * | ||||||
| Downgraded; CreditWatch Action | ||||||
| To | From | |||||
|
Lexgarant Insurance Co. Ltd. |
||||||
| Issuer Credit Rating | CCC+/Watch Dev/-- | BB-/Watch Neg/-- | ||||
| Financial Strength Rating | CCC+/Watch Dev/-- | BB-/Watch Neg/-- | ||||
| * * * * * * * * * * * * * * * * * VSK Insurance JSC * * * * * * * * * * * * * * * * | ||||||
| Downgraded; CreditWatch Action | ||||||
| To | From | |||||
|
VSK Insurance JSC |
||||||
| Financial Strength Rating | CCC+/Watch Dev/-- | BB/Watch Neg/-- | ||||
| * * * * * * * * * * * * * Sberbank Insurance LLC * * * * * * * * * * * * * | ||||||
| Downgraded | ||||||
| To | From | |||||
|
Sberbank Insurance LLC |
||||||
| Financial Strength Rating | CCC-/Watch Neg/-- | BB+/Watch Neg/-- | ||||
| Not Rated | ||||||
|
Sberbank Insurance LLC |
||||||
| Financial Strength Rating | NR | CCC-/Watch Neg/-- | ||||
| * * * * * * * * * * * * * * Stanpeak Ltd. LLC * * * * * * * * * * * * * * | ||||||
| Downgraded; CreditWatch Action | ||||||
| To | From | |||||
|
Stanpeak Ltd. LLC |
||||||
| Issuer Credit Rating | CCC+/Watch Dev/-- | BB/Watch Neg/-- | ||||
|
Reso-Garantia Insurance Co. |
||||||
| Issuer Credit Rating | CCC+/Watch Dev/-- | BBB-/Watch Neg/-- | ||||
| Financial Strength Rating | CCC+/Watch Dev/-- | BBB-/Watch Neg/-- | ||||
| NR--Not Rated | ||||||
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