Debt capital markets still attractive to global insurers - S&P

Written by Adam Cadle

22/06/2020

Global insurers are still accessing debt capital markets at favourable coupon rates, despite higher credit spreads triggered by the COVID-19-induced recession, and around $140bn (or 20% of total outstanding debt) is coming for call or maturity by 31 December 2021, S&P Global Ratings (S&P) has said.

The ratings agency said some insurers could increase their use of debt at attractive rates to boost solvency ratios or for growth opportunities, particularly on the P&C side, where insurance pricing “looks attractive”.

"Insurance bonds remain attractive to investors, providing diversification, relatively favorable yields, and high security--with an average issuer credit rating in the 'A' category," S&P Global Ratings' analyst, Ali Karakuyu said.

"We believe much of the issuance to date has been opportunistic, with some insurers taking advantage of favourable market conditions instead of repairing weakened balance sheets."

According to S&P, investors are particularly sensitive to credit quality when the economic environment is uncertain, which should advantage insurers' issuances.

“This is due to the relatively strong credit quality of insurers, which shines when compared with non-financial corporate sectors,” it said.

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