Geopolitical risks could eat up 95% of European insurers’ capital surplus, S&P warns

Written by Adam Cadle

29/11/2024

Geopolitical risks could eat up 95% of European insurers’ capital surplus, S&P Global Ratings has warned.

Its insurance outlook for the region identified spillover from regional wars, leading to a prolonged downturn in financial markets and persistently elevated inflation, as the top external risk.

Capital adequacy at about 35% of EMEA’s insurers could be sensitive to a prolonged financial market downturn, even though the sector as a whole is likely to prove resilient, new scenario analysis by S&P Global Ratings has revealed.

Nevertheless, capital adequacy remains a ratings strength for insurers in EMEA. Even under the stresses applied in S&P Global Ratings’ scenario, the aggregate capital surplus would remain elevated at 166%.

“Capital sensitivity is important to our ratings analysis especially when events are changing rapidly,” it said.

“Nonetheless, we generally take a prospective view of capital adequacy, and consider the implications for our ratings over the next two to three years.”

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