LONDON-Thursday 12 March 2020 [ AETOS Wire ]
(BUSINESS WIRE)--
Lebanon has a long history of economic and political instability. In
the past, local insurers have been successful at navigating this
challenging environment. However, recent civil unrest and a ballooning
public debt have increased the level of economic uncertainty, which is
negatively impacting the credit quality of Lebanon’s insurance market.
In a new Best’s Special Report, “Lebanese Insurance Market Faces Mounting Uncertainty”, AM Best
notes that in contrast with the wider Middle East and North Africa
region, the Lebanese insurance market overall has an asset allocation
that favours high levels of cash and fixed income instruments over
higher risk investments. Nonetheless, the vast majority of Lebanese
insurers’ investments are exposed to domestic issuers, and consequently
to the socio-economic and political turmoil the country is experiencing.
Specifically, uncertainties regarding the credit quality of Lebanese
government debt pose the most imminent threat to domestic insurers’
balance sheets.
AM Best maintains close contact with the
companies it rates in Lebanon and notes that they have been able to
maintain robust, albeit reduced, levels of risk-adjusted capitalisation
(as measured by Best’s Capital Adequacy Ratio [BCAR]), underpinned by a
generally low level of underwriting leverage. That said, the increased
social, political and economic instability in the country since October
2019 has exacerbated structural market issues that, in AM Best’s
opinion, could further weaken insurers’ balance sheet strength.
Since the onset of the social unrest, AM
Best-rated insurers have been proactive in implementing appropriate
risk management actions. Measures have included triggering partial
contingency plans, shifting investment exposure where possible and
closely monitoring cash flows to limit the impact of a potential
devaluation of the Lebanese pound.
Despite these actions, the mounting
level of uncertainty in Lebanon implies that operating conditions could
deteriorate further. As the situation evolves, AM Best will continue to
monitor closely the ability of rated companies to meet their financial
obligations as they fall due.
To access a complimentary copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=295194.
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 New
York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.
For more information, visit www.ambest.com.
Copyright © 2020 by A.M. Best Company, Inc. and/or its affiliates.
ALL RIGHTS RESERVED.
ALL RIGHTS RESERVED.
View source version on businesswire.com: https://www.businesswire.com/news/home/20200305005887/en/
Contacts
Ben Diaz-Clegg
Financial Analyst
+44 20 7397 0293
ben.diaz-clegg @ambest.com
Ghislain Le Cam, CFA, FRM
Director, Analytics
+44 20 7397 0268
ghislain.lecam@ambest.com
Edem Kuenyehia
Director, Market Development & Communications
+44 20 7397 0280
edem.kuenyehia@ambest.com
Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com
Financial Analyst
+44 20 7397 0293
ben.diaz-clegg @ambest.com
Ghislain Le Cam, CFA, FRM
Director, Analytics
+44 20 7397 0268
ghislain.lecam@ambest.com
Edem Kuenyehia
Director, Market Development & Communications
+44 20 7397 0280
edem.kuenyehia@ambest.com
Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com
