This article presents S&P Global Ratings' insurance industry and country risk assessments (IICRAs) for 102 insurance sectors covering 52 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 key risks of each sector, which we classify in 9 different categories. In this publication, we have updated the description of some of these categories, where we have aligned them to better reflect the evolving risks to which insurers are exposed.
Table 1
| Top Key Risks | ||
|---|---|---|
| Key Risk Category | Description | |
| Country Risk | Macroeconomic risks | Risk factor taking into account considerations such muted economic growth, recessionary environments, inflationary pressures, and foreign exchange risk. |
| Government policy and regulatory risks | Markets exposed to institutional and rule of law risks, including changes in government, regulatory policies, and accounting changes, often resulting in material impacts on insurers' business models or profitability. | |
| Industry Risk | Muted premium growth prospects | The lack of potential for premium growth either because the market is mature or due to high inflation resulting in near-zero (or negative) real premium growth. |
| 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. | |
| 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 physical and external risks | Markets with material exposure to natural catastrophes, climate risk, as well as other external or man-made risks such as cyber and terrorism. | |
| Investment performance risk | Capturing financial markets risks, including interest rates, and mark to market volatility. | |
| 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. | |
| Litigious legal system | A sector where litigation often leads to lengthy court cases, potentially causing social inflation risks, increasing the tail of an insurer's liabilities, and consequently, resulting in unpredictable claims settlements. | |
Latest Actions
Since our last publication ("Insurance Industry And Country Risk Assessment Update: December 2021," published Dec. 6, 2021), we have:
- Revised our IICRA on Russia's property and casualty (P/C) insurance sector to very high risk, from moderately high risk. The very high country risk reflects our view of increased geopolitical and economic risks in Russia. In turn, our high industry risk reflects the impact of the volatile and uncertain macroeconomic environment and its subsequent negative effect on the sector's profitability. In our view, Russian insurers will face severe profitability constraints arising from both escalating claims costs and underwriting deficits, combined with investment valuation losses. The impact of sanctions, both recent and potentially additional, could further intensify volatility in the P/C market.
- Revised our industry risk assessment on Italy's P/C sector to low from moderately low, thanks to the sector's strong profitability prospects. This reflects 10% return on equity and combined ratios that have consistently exceeded forecasts and remained below 95% in recent years. Over the next two years, we expect a moderate deterioration in combined ratios on the back of a rebound in claims frequency post-COVID-19, but these will likely remain lower than pre-pandemic levels, allowing the sector to absorb the potential impact of inflation on claims costs.
- Revised our industry risk assessment on the UAE P/C sector to low from moderately low. The change in industry risk is mainly due to the market's stronger operating performance in recent years when compared with peers. We expect the market will remain highly profitable in 2022-2023, although perhaps at a slightly lower level due to high competition in the motor line of business.
- Discontinued our IICRA on the Jordan P/C sector.
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 April 4, 2022 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Country Risk | Industry Risk | IICRA | Top Risk 1 | Top Risk 2 | Top Risk 3 | |||||||||
| Angola | Very high | High | Very high | Macroeconomic risks | Government policy and regulatory risks | Weak technical results | ||||||||
| Very high | High | Very high | Macroeconomic risks | Muted premium growth prospects | Investment performance risk | |||||||||
| Very low | Low | Low | Exposure to physical and external risks | Intense competitive environment | Investment performance risk | |||||||||
| Low | Moderately low | Low* | Intense competitive environment | Exposure to physical and external risks | Investment performance risk | |||||||||
| High | Moderately high | High | Exposure to high-risk assets | Muted premium growth prospects | Macroeconomic risks | |||||||||
| Bahrain | High | Moderately low | Moderately high* | Macroeconomic risks | Muted premium growth prospects | Exposure to high-risk assets | ||||||||
| Low | Moderately low | Intermediate | Exposure to physical and external risks | Intense competitive environment | Government policy and regulatory risks | |||||||||
| Moderately high | Moderately low | Moderately high | Macroeconomic risks | Muted premium growth prospects | Weak technical results | |||||||||
| Very low | Moderately low | Low | Intense competitive environment | Weak technical results | Exposure to physical and external risks | |||||||||
| Moderately high | Moderately low | Intermediate* | Exposure to high-risk assets | Intense competitive environment | Government policy and regulatory risks | |||||||||
| Moderately high | Moderately high | Moderately high | Weak technical results | Macroeconomic risks | Intense competitive environment | |||||||||
| Czech Republic | Intermediate | Moderately low | Intermediate | Exposure to physical and external risks | Intense competitive environment | Macroeconomic risks | ||||||||
| 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 policy and regulatory risks | Investment performance risk | |||||||||
| Very low | Moderately low | Low | Intense competitive environment | Exposure to physical and external risks | Investment performance risk | |||||||||
| Low | Moderately low | Low* | Intense competitive environment | Macroeconomic risks | Government policy and regulatory 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 policy and regulatory risks | |||||||||
| Moderately high | Low | Intermediate | Macroeconomic risks | Muted premium growth prospects | ||||||||||
| Low | Moderately high | Intermediate | Exposure to physical and external risks | Exposure to high-risk assets | Muted premium growth prospects | |||||||||
| High | Moderately low | Moderately high* | Macroeconomic risks | Weak technical results | ||||||||||
| Kenya | High | High | High | Macroeconomic risks | Intense competitive environment | Weak technical results | ||||||||
| Low | Moderately low | Intermediate | Investment performance risk | Exposure to high-risk assets | Intense competitive environment | |||||||||
| Moderately high | Moderately low | Intermediate* | Government policy and regulatory risks | Exposure to high-risk assets | ||||||||||
| Malaysia | Intermediate | Moderately low | Intermediate | Intense competitive environment | Macroeconomic risks | Government policy and regulatory risks | ||||||||
| Moderately high | Moderately low | Intermediate* | Macroeconomic risks | Muted premium growth prospects | Investment performance risk | |||||||||
| Morocco | Moderately high | Moderately low | Moderately high | Intense competitive environment | Macroeconomic risks | |||||||||
| Very low | Moderately high | Intermediate | Intense competitive environment | Investment performance risk | Exposure to physical and external risks | |||||||||
| Low | Moderately low | Intermediate | Exposure to physical and external risks | Intense competitive environment | Government policy and regulatory risks | |||||||||
| Very low | Low | Low | Investment performance risk | Exposure to high-risk assets | ||||||||||
| Poland | Moderately high | Moderately low | Moderately high | Macroeconomic risks | Intense competitive environment | Exposure to physical and external risks | ||||||||
| Portugal | Intermediate | Moderately low | Intermediate | Investment performance risk | Intense competitive environment | |||||||||
| Intermediate | Moderately low | Intermediate | Exposure to high-risk assets | Intense competitive environment | ||||||||||
| Very high | High | Very high | Macroeconomic risks | Weak technical results | Government policy and regulatory risks | |||||||||
| Moderately high | Moderately low | Intermediate* | Macroeconomic risks | Intense competitive environment | ||||||||||
| Singapore | Very low | Low | Low | Muted premium growth prospects | Intense competitive environment | Macroeconomic risks | ||||||||
| Intermediate | Moderately low | Intermediate | Government policy and regulatory risks | Exposure to physical and external risks | Macroeconomic risks | |||||||||
| Moderately high | Moderately low | Moderately high | Muted premium growth prospects | Macroeconomic risks | Intense competitive environment | |||||||||
| Intermediate | Low | Low* | Investment performance risk | Intense competitive environment | ||||||||||
| Very low | Low | Low | Investment performance risk | Exposure to high-risk assets | ||||||||||
| Switzerland | Very low | Low | Very low* | Investment performance risk | Exposure to physical and external risks | Macroeconomic risks | ||||||||
| Intermediate | Low | Intermediate | Exposure to physical and external risks | Investment performance risk | Intense competitive environment | |||||||||
| Thailand | Moderately high | Moderately low | Intermediate* | Exposure to physical and external risks | Macroeconomic risks | Government policy and regulatory risks | ||||||||
| High | Moderately high | High | Macroeconomic risks | Weak technical results | Government policy and regulatory risks | |||||||||
| Intermediate | Low | Intermediate | Intense competitive environment | Exposure to high-risk assets | ||||||||||
| Low | Moderately high | Intermediate | Litigious legal system | Government policy and regulatory risks | Intense competitive environment | |||||||||
| Very low | Moderately high | Intermediate | Investment performance risk | Exposure to physical and external risks | Litigious legal system | |||||||||
| High | High | High | Exposure to high-risk assets | Macroeconomic risks | Government policy and regulatory 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 April 4, 2022 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Country Risk | Industry Risk | IICRA | Top Risk 1 | Top Risk 2 | Top Risk 3 | |||||||||
| Australia | Very low | Moderately low | Low | Government policy and regulatory risks | Intense competitive environment | Weak technical results | ||||||||
| Low | Moderately high | Intermediate | Investment performance risk | Muted premium growth prospects | Government policy and regulatory risks | |||||||||
| Low | Moderately high | Intermediate | Investment performance risk | Intense competitive environment | Government policy and regulatory risks | |||||||||
| Moderately high | Low | Intermediate | Macroeconomic risks | Muted premium growth prospects | ||||||||||
| Very low | Moderately low | Very low* | Investment performance risk | Muted premium growth prospects | Macroeconomic risks | |||||||||
| Moderately high | Moderately low | Intermediate* | Exposure to high-risk assets | Investment performance risk | Government policy and regulatory risks | |||||||||
| Moderately high | Moderately high | Moderately high | Investment performance risk | Macroeconomic risks | ||||||||||
| Czech Republic | Intermediate | Moderately Low | Intermediate | Muted premium growth prospects | Investment performance risk | Macroeconomic risks | ||||||||
| Very low | Moderately high | Intermediate | Investment performance risk | Exposure to high-risk assets | Macroeconomic risks | |||||||||
| Very low | Moderately high | Intermediate | Investment performance risk | Exposure to high-risk assets | Macroeconomic risks | |||||||||
| Low | Moderately low | Low* | Investment performance risk | Government policy and regulatory risks | Muted premium growth prospects | |||||||||
| Very low | Moderately high | Intermediate | Investment performance risk | Government policy and regulatory risks | Muted premium growth prospects | |||||||||
| Low | Low | Low | Macroeconomic risks | Investment performance risk | Intense competitive environment | |||||||||
| Intermediate | Moderately low | Intermediate | Investment performance risk | Government policy and regulatory risks | ||||||||||
| Moderately high | Moderately low | Intermediate* | Macroeconomic risks | Investment performance risk | ||||||||||
| High | Moderately high | High | Investment performance risk | Macroeconomic risks | Exposure to high-risk assets | |||||||||
| Low | Moderately low | Intermediate | Exposure to high-risk assets | Investment performance risk | Government policy and regulatory risks | |||||||||
| High | Moderately low | Moderately high* | Investment performance risk | Macroeconomic risks | ||||||||||
| Low | Moderately high | Intermediate | Investment performance risk | Government policy and regulatory risks | Exposure to high-risk assets | |||||||||
| Malaysia | Intermediate | Low | Intermediate | Investment performance risk | Macroeconomic risks | Government policy and regulatory risks | ||||||||
| Moderately high | Low | Intermediate | Macroeconomic risks | Muted premium growth prospects | Investment performance risk | |||||||||
| Very low | Moderately high | Intermediate | Investment performance risk | Exposure to high risk assets | Muted market growth prospects | |||||||||
| Low | Low | Low | Muted premium growth prospects | Government policy and regulatory risks | Intense competitive environment | |||||||||
| Very low | Moderately high | Intermediate | Investment performance risk | Exposure to high-risk assets | Macroeconomic risks | |||||||||
| Oman | Moderately high | Moderately low | Moderately high | Macroeconomic risks | Exposure to high-risk assets | Muted premium growth prospects | ||||||||
| Moderately high | Moderately high | Moderately high | Macroeconomic risks | Investment performance risk | Litigious legal system | |||||||||
| Portugal | Intermediate | Moderately high | Moderately high | Weak technical results | Investment performance risk | Intense competitive environment | ||||||||
| Singapore | Very low | Low | Low | Investment performance risk | Intense competitive environment | Macroeconomic risks | ||||||||
| Intermediate | Moderately low | Intermediate | Investment performance risk | Muted premium growth prospects | Macroeconomic risks | |||||||||
| Moderately high | Moderately low | Moderately high | Muted premium growth prospects | Macroeconomic risks | Exposure to high-risk assets | |||||||||
| Intermediate | Moderately low | Intermediate | Muted premium growth prospects | Intense competitive environment | ||||||||||
| Very low | Moderately high | Intermediate | Investment performance risk | Exposure to high-risk assets | Macroeconomic risks | |||||||||
| Switzerland | Very low | Moderately low | Low | Investment performance risk | Government policy and regulatory risks | Macroeconomic risks | ||||||||
| Intermediate | Moderately high | Moderately high | Investment performance risk | Exposure to high-risk assets | ||||||||||
| Thailand | Moderately high | Moderately low | Intermediate* | Investment performance risk | Macroeconomic risks | Intense competitive environment | ||||||||
| Low | Moderately low | Low* | Intense competitive environment | Investment performance risk | Macroeconomic risks | |||||||||
| Very low | Moderately low | Low | Investment performance risk | Intense competitive environment | Macroeconomic risks | |||||||||
| Moderately high | Moderately low | Moderately high | Macroeconomic risks | Muted premium 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 April 4, 2022 | ||||||
|---|---|---|---|---|---|---|
| Country Risk | Industry Risk | IICRA | Top Risk 1 | Top Risk 2 | Top Risk 3 | |
| Very low | Moderately low | Low | Government policy and regulatory risks | Intense competitive environment | Muted premium growth prospects | |
| Moderately high | Moderately high | Moderately high | Macroeconomic risks | Muted premium growth prospects | Government policy and regulatory risks | |
| Very low | Moderately high | Intermediate | Government policy and regulatory risks | Investment performance risk | ||
| Very low | Moderately high | Intermediate | Weak technical results | Government policy and regulatory risks | Exposure to high-risk assets | |
| Low | Moderately high | Intermediate | Muted premium growth prospects | Intense competitive environment | ||
| Very low | Moderately low | Low | Intense competitive environment | Government policy and regulatory risks | Weak technical results | |
Table 5
| Global Sectors Industry And Country Risk Assessments On April 4, 2022 | ||||||
|---|---|---|---|---|---|---|
| Country risk | Industry Risk | IICRA | Top Risk 1 | Top Risk 2 | Top Risk 3 | |
| Low | Low | Low | Weak technical results | Investment performance risk | Government policy and regulatory risks | |
| Low | High | Intermediate* | Weak technical results | Exposure to physical and external risks | ||
| Global Reinsurance Property/Casualty | Low | Moderately high | Intermediate | Exposure to physical and external risks | Investment performance risk | Weak technical results |
| Low | Moderately low | Intermediate | Muted premium growth prospects | Macroeconomic risks | ||
Table 6
| Other Sectors Industry And Country Risk Assessments On April 4, 2022 | ||||||
|---|---|---|---|---|---|---|
| Country Risk | Industry Risk | IICRA | Top Risk 1 | Top Risk 2 | Top Risk 3 | |
| Very low | Moderately high | Intermediate | Macroeconomic risks | Investment performance risk | Muted premium growth prospects | |
| Canada Mortgage Insurance | Very low | Moderately high | Intermediate | Macroeconomic risks | Weak technical results | Muted premium growth prospects |
| Very low | Moderately high | Intermediate | Macroeconomic risks | Weak technical results | Muted premium growth prospects | |
| Very low | Low | Low | Macroeconomic risks | Intense competitive environment | Investment performance risk | |
| Very low | Low | Low | Muted premium growth prospects | Macroeconomic risks | Weak technical results | |
Related Criteria
- Insurers Rating Methodology, July 1, 2019
- Country Risk Assessment Methodology And Assumptions, Nov. 19, 2013
Related Research
- Country Risk Assessments Update: April 2022, April 1, 2022
- Russian Property/Casualty Insurance Industry And Country Risk Assessment Revised To Very High Risk, March 10, 2022
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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