S&P Sees Limited Tariff Impact on European Insurers, Reinsurers

Tariff-related risks are unlikely to affect the ratings or ratings outlooks of European insurers and reinsurers in the short to medium term, S&P Global said. 

The rating agency noted that given the investment-heavy nature of their business, European insurers and reinsurers are exposed to market risks. Tariff-related risks that could affect those companies include a decline in insurers' top-line growth as a result of economic deterioration and increases in claims costs and combined claim and cost ratios, S&P said. 

While saying it didn't anticipate a short- or medium-term impact from tariff activities on European insurers and reinsurers ratings and outlooks, S&P acknowledged that prolonged market weakness could impair those companies' balance sheets. Investment risks are typically more pronounced for life insurers than for nonlife insurers and reinsurers, the rating agency said.

"Depending on the extent and length of the market downturn, financial leverage and coverage ratios could deteriorate," an S&P analysis said. 

S&P noted that it currently has a stable outlook for Europe, Middle East, and Africa insurers. "The tariffs would only affect our ratings and outlooks on European (re)insurers if the capital market downturn persisted or if economic effects exceed our current expectations," S&P said. 

The rating agency's analysis cited the fact that the sharp market decline in 2020—followed by a rapid recovery—did not materially impair European insurers' and reinsurers' capital positions. "We currently view the European (re)insurance sector as stable, not least due to the robust capital surplus," S&P said.