The short-term impact of the U.S./Israeli conflict with Iran on the credit quality of (re) insurers has been limited, according to AM Best. However, a prolonged conflict may have wider market implications.

In its new Best’s Commentary, "Prolonged Middle East Conflict Will Test Global Market Resilience of (Re)Insurers", AM Best states that it is continuing to monitor and assess the situation for any impact on ratings. At present, the insurance impact to domestic and international (re)insurers is manageable. The scale of losses at this stage is not material. With low net retention from the regional market, net losses should be adequately absorbed. Similarly for reinsurers, one-off large losses are absorbable to the sector.

Mahesh Mistry, senior director, head of analytics at AM Best’s London office and the main author of the commentary, said, "While AM Best does not anticipate any rating actions in the short term, much will depend on the length of the conflict. If it were to last several months, then the impact on global and regional economies is likely to be significant in terms of oil and gas prices, supply chain disruptions and inflationary pressures. These multiple points of pressure will affect both global and regional insurance companies."

Sridhar Manyem, senior director, Industry Research and Analytics at AM Best's Oldwick, N.J., headquarters, added, "The U.S. International Development Finance Corporation has stated that it is mobilising its Political Risk Insurance and Guaranty Products and that Chubb will act as the lead underwriter. While further announcements are expected, the actual mechanics, structure and implementation of the proposal are not clear yet. AM Best is of the opinion that the impact of the scheme can only be assessed when more clarity is provided by the DFC."

To access a complimentary copy of this commentary, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=363221.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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