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Best’s News & Research Service - March 04, 2022 03:31 PM (EST)

Best’s Commentary: US Insurers’ Indirect Exposures to Russia May Be Significant

  • March 04, 2022 03:31 PM (EST)

Oldwick //BestWire// - The impact of the conflict between Russia and Ukraine on U.S. insurers’ direct investments to the two countries appears to be limited, as they have less than $2 billion in bonds exposed to Russia and Ukraine. However, according to a new AM Best commentary, insurers’ indirect exposures may be more substantial.

In its Best’s Commentary, “US Insurers’ Indirect Exposures to Russia May Be Significant,” AM Best estimates that the largest exposure at any company is less than 2% of capital and surplus, with the vast majority of these bonds investment grade NAIC-2. The commentary notes that higher capital charges could result if the issues were to fall below investment grade for an extended period, depending on the duration of the conflict and other factors.

While U.S. insurers have little exposure to Russian companies in their stock portfolios, they do have exposures to companies that derive a share of earnings from Russia. “Indirect investments through suppliers and customers of U.S. and European companies may still be impacted, similarly to the already substantial impact on commodity and energy markets,” said Jason Hopper, associate director, industry research and analytics, AM Best.

With the worsening business operating environment in Russia, more companies have started discontinuing operations in the country; in addition, oil prices have spiked and with increased volatility in financial markets. The situation continues to unfold, making it too early to determine specific impacts, but the commentary notes that the markets can be expected to rebound as has been seen in other geopolitical crises.

To access the full copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=318039 .

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.



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