S&P slashes ratings on three Russian insurers, places five on watch, as sanctions hit

S&P Global Ratings has cut the ratings on the Russian insurers in its coverage universe, on the back of economic and geopolitical risks following the Ukraine invasion as well as the prior week downgrade of Russia’s sovereign rating.

"We consider that the escalation of Russia-Ukraine tensions, the military operations in Ukraine, and the widening of sanctions against Russia could lead to conditions that eventually destabilize Russia's economy and financial system," S&P said in its statement.

Sanctions "would likely constrain Russia's long-term growth prospects and potentially make the country less attractive to investors in the medium-to-long term," the rating agency said.

In turn, the decline of domestic markets "represent a significant risk for insurers' capital positions," although Russian regulatory relief, allowing back-dating of mark-to-market valuations to February 18, remove "immediate pressure" on solvency ratios, S&P said.

A long position in foreign currency among insurers could provide relief on ruble-denominated valuations, S&P also noted.  The FX impact on loss ratios will only come with a lag, S&P noted.

The credit ratings of Ingosstrakh Insurance, in which Generali holds a minority stake, and Sogaz Insurance were both cut to BBB- from BBB and placed on CreditWatch negative to reflect the lowering of the local currency sovereign credit rating and CreditWatch status of Russia.

The financial strength ratings of Sberbank Insurance was cut to BB+ from BBB- and placed on similar grounds plus "pressure" on Sberbank group's creditworthiness.

Meanwhile, the ratings of VSK Insurance JSC, Energogarant PJSIC, Lexgarant Insurance, Alfastrakhovanie OAO, Insurance Co. RESO-GARANTIA, and its nonoperating holding company (NOHC), Stanpeak, have kept their ratings for now, but have been placed on CreditWatch negative.

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