Ratings agency Moody’s expects the Iran conflict to have a limited short-term credit impact on insurers in the Gulf Cooperation Council region, but risks will increase if the turmoil continues.
“The scenario they foresee is that the conflict will be relatively short-lived,” she said in the report.
It will likely last several weeks, after which navigation and air traffic in the Strait of Hormuz will resume on a large scale.
According to this scenario, insurers in the GCC countries would not face significant and immediate pressure on their credit reports.
risk burden
The agency explained that the largest and most diversified insurance companies, with relatively low exposure to real estate and equities, are less exposed to risk than smaller companies, and that in their credit rating portfolios (which tend to be larger companies), approximately 40% of their capital risk bearing reflects asset risk, according to capital adequacy measures, and real estate and equity exposures account for approximately one-third of their capital risk bearing.
direct impact
We estimate that a 20% drop in the valuation of real estate and stocks would reduce the rating agency’s total capital by approximately 7%, but many rating insurance companies have sufficient capital margins, so this amount can be absorbed.
In contrast, smaller insurers in the Gulf often have more exposure to stocks and real estate, as well as limited capital margins, it added.
As war risks are typically excluded from standard insurance policies in GCC countries, the direct impact of claims arising from conflicts would be minimal for all insurers in GCC countries.
Ratings agency Moody’s predicted that the Iran conflict would have a limited short-term credit impact on insurance companies in the Gulf Cooperation Council (GCC) region, but risks would rise if the turmoil continues.
“The likely scenario is that the conflict will be relatively short-lived,” the report said.
The effects are expected to last for several weeks, after which navigation and air traffic in the Strait of Hormuz will largely resume.
According to this scenario, insurance companies in member states would not face significant and immediate pressure on their credit information.
risk burden
The agency explained that larger, more diversified insurance companies have relatively lower exposure to real estate and stocks and are less exposed to risks than smaller companies. Capital adequacy measurements show that in rating portfolios that tend to favor large companies, about 40% of the capital risk burden reflects asset risk, with real estate and equity exposures accounting for about one-third of the capital risk burden.
direct impact
It is estimated that a 20% decline in real estate and stock valuations would reduce the rating agency’s total capital by approximately 7%, but this amount is likely to be largely absorbable as most rating insurance companies have sufficient capital margins.
In contrast, smaller insurers in the Gulf often have more exposure to stocks and real estate, as well as limited capital margins, it added.
As war risks are typically excluded from standard insurance contracts in the region, the direct impact of claims arising from conflicts is expected to be minimal for all insurers in member states.
