‘Small pockets’ of insurer exposure outside Russia as Ukraine conflict rages

As Russia’s invasion of Ukraine continues, there are “small pockets of exposure” for insurers outside Russia, according to Simon Ashworth (pictured), chief analytical officer for Insurance Ratings at  S&P Global Ratings.

Speaking to Intelligentinsurer.com, Ashworth said that while many global re/insurers outside Russia have been shielded from credit rating downgrades due to their lack of exposure in Russia, “a number of insurers in the Taiwanese market have linked some Russian exposure to their investment strategy, and foreign investments”.

This exposure equates to around 6 percent in the aggregate level but, he added, that can range more widely for different insurers within that market.

“As with the global markets, which have increased their capital buffers since the height of the COVID-19 pandemic, we believe that capital buffers that have been rebuilt within the Taiwanese market will hold there,” he said.

Ashworth highlighted strategic shifts made by Europe, Middle East and Africa (EMEA)-based primary insurers over the last few years as they have “edged back their operations from Russia”.

“This has happened slowly but Russia has not been a strategic country for growth for a number of the conglomerate insurers that are themselves based in EMEA,” he said.

On the impact of the Ukraine conflict on insurers in the Taiwanese market, Ashworth said: “We’re citing the Russia-based investments within Taiwan, which make up less than 1 percent of invested assets, but they do account for 6 percent of shareholder funds, or 4 percent of our view of available capital for the Taiwanese insurers.

“On that basis of available capital the estimates range from as low as 2 percent to as high as 12 percent of available capital.”

But the impact on available capital will be “negligible” in some cases, he added.

“We do feel that the sector has the ability to absorb the adverse impact from the depreciation of those assets in recent days.”

Russian ‘reprieve’ with regulatory freeze

Russia-domiciled insurers have a “temporary reprieve” from the impacts of the capital market volatility caused by the Russian invasion in the form of a freeze allowed under Russian rules on how they do their regulatory capital calculation.

Ashworth explained that this important element for insurers had come up in the last few days.

“Like banks, Russian insurers are permitted within their regulatory capital calculation to look at securities valuation as of February 18, 2022, prior to the capital market’s volatility.

“That’s obviously an important factor with respect to the regulatory capital ratios for insurers,” he said.

And this data is important for credit ratings analysis.

“From a regulatory capital perspective there’ll be a kind of freeze, or a continuation of the position prior to capital market volatility. From a regulatory perspective there’s certainly a temporary freeze, or a reprieve.”