OLDWICK, N.J.--(BUSINESS WIRE)--In this episode of AMBestTV, Andrea Keenan, senior managing director, strategy and communications, AM Best Rating Services, addresses how AM Best considers the potential impact of sovereign credit and country risks on a company-by-company basis. Click on http://www.ambest.com/v.asp?v=ambcountryrisk420 to view the entire program.
As the coronavirus spreads and countries take an enormous economic hit in the fallout, the risk of sovereign credit rating downgrades significantly increases. Although AM Best does not issue ratings on government debt, it considers such risks through its country risk analysis, which is factored into all of Best’s Credit Ratings.
“Sovereign credit risk is essentially the willingness and ability of a sovereign government to pay back its debt on its public books. Country risk is about the operating environment of an insurer and what risks are brought to that insurer, which is beyond its control and beyond the specialization of an insurance company,” said Keenan.
Keenan also explained that sovereign risk is still relevant to a country risk, because a government’s ability to manage its debt is relevant to the insurers that participate in the economy; however, an insurer still can be more financially secure than the government of the country in which it is domiciled.
“In this time where we are starting to see sovereign downgrades by those that rate sovereign credit, AM Best’s ratings tend to stay stable,” said Keenan. “There is a volatility that will occur in many of the sectors in the economy, but the insurance sector does not have volatility based purely on the creditworthiness of the sovereign.”
To access the full copy of the commentary, “Best’s Credit Ratings, Sovereign Credit Risk, and Country Risk FAQs,” please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=295899.
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