A.M. Best Briefing: Puerto Rican Debt Exposure for Insurers is Minimal, But Strong Headwinds Remain

OLDWICK, N.J.--()--Despite the ongoing economic issues in Puerto Rico, the domestic property/casualty (P/C) insurers have managed to generate operating profits over the past 10 years, driven primarily by solid and consistent underwriting performance. In addition, according to an A.M. Best briefing, U.S. legislative efforts that created municipal bankruptcy protection may help to shield those carriers that otherwise would have faced rating pressure.

The Best’s Briefing, “Puerto Rican Debt Exposure for Insurers is Minimal But Strong Headwinds Remain,” notes Puerto Rico’s recent filing for bankruptcy under Title III the Puerto Rico Oversight Management and Economic Stability Act, established by the U.S. Congress in 2016. Despite the Commonwealth’s ongoing debt crisis, Puerto Rico’s P/C insurers effectively have absorbed their exposure to Puerto Rican bond holdings. According to the briefing, from 2013 through 2015, P/C insurers incurred sizable capital losses (realized and unrealized) of approximately $170 million, as evidenced in current depressed valuations. Because of the decline in the valuation of Puerto Rican bonds, island-domiciled companies have worked on improving the quality of their investment portfolios over the past five years.

For these insurers, A.M. best believes the stronger headwinds will revolve around the overall economic malaise and the ongoing demographic pressures given the Commonwealth’s fleeing population. A.M. Best will continue to closely monitor events in Puerto Rico and their potential impact on rated entities.

To access the full copy of this briefing, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=261456.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.

Contacts

A.M. Best
Brian O’Larte, +1 908-439-2200, ext. 5138
Associate Director
brian.o'larte@ambest.com
or
Meg Mulry, +1 908-439-2200, ext. 5446
Senior Economist - Economic & Industry Research
meg.mulry@ambest.com
or
Christopher Sharkey, +1 908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, +1 908-439-2200, ext. 5644
Director, Public Relations
james.peavy@ambest.com

Contacts

A.M. Best
Brian O’Larte, +1 908-439-2200, ext. 5138
Associate Director
brian.o'larte@ambest.com
or
Meg Mulry, +1 908-439-2200, ext. 5446
Senior Economist - Economic & Industry Research
meg.mulry@ambest.com
or
Christopher Sharkey, +1 908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, +1 908-439-2200, ext. 5644
Director, Public Relations
james.peavy@ambest.com