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Evolving Criteria

Rating agency and regulatory developments


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Understanding Rating Drivers During Uncertain Times

These are changing times for the (re)insurance sector, a point that is increasingly reflected in the busy agenda of ratings agencies, insurance supervisors, regulators and policy makers. Macro-economic volatility, climate change, emerging risks and market uncertainties are all on their radars, with potential implications for (re)insurer capital and credit ratings. The annual Evolving Criteria report highlights the most important developments to help insurers stay informed on the pressing changes to the credit rating and regulatory environment that may impact their rating position and goals.

Five things you need to know

1 Rating agencies are currently assigning “stable” outlooks to most industry segments, reflecting positive underwriting fundamentals in the hardening market and strong capital positions for most insurance sectors.
2 The global macroeconomic environment is a key area of focus for ratings agencies. Rising interest rates, declining equity markets and bond values lead to considerable reductions of available (re)insurer capacity in the first half of 2022.
3 Rating agencies continue to refine rating methodologies and criteria to reflect changes in the market and as they integrate Environmental, Social and Governance (ESG) factors into the ratings process.
4 Standard & Poor’s is expected to announce revised proposals to their capital model criteria no earlier than the fourth quarter of 2022.
5 On the regulatory front, insurance supervisors and financial market regulators are also focusing on ESG, developing guidelines and reporting requirements such as disclosing greenhouse gas emissions and climate change risks.

Topics Rating Agencies and Regulators Will Focus on in 2023

  • Investment Market Volatility Puts Pressure on Capital
  • Inflation Effect on Loss Reserves and Performance
  • Secondary Perils and Model-Miss

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