Matt Sheehan reports for Reinsurance News:
AM Best has revised its market segment outlook on Bolivia’s insurance industry to negative from stable, owing mainly to the coronavirus (COVID-19) pandemic.
The rating agency noted that the outbreak has exacerbated Bolivia’s political turmoil and contributed to an overall slowdown in economic activity.
In combination with the vulnerable economic environment and the political uncertainty in Bolivia, AM Best believes that COVID-19 will dampen growth targets and the stability of insurers’ balance sheets.
Along with a decline in economic activity toward the end of 2019, Bolivia experienced a complicated presidential election in October, followed by civil protests and the eventual forced resignation of Evo Morales.
These events are triggering volatility and further pressuring the country’s micro and macro fundamentals, worsened by widening fiscal deficits and declining hydrocarbon revenues.
Combined ratios among non-life insurers have traditionally been high, and the eventual impact of COVID-19 on the number and amounts of claims is unknown, AM Best added.
And although solvency ratios are healthy, interest rate pressures, volatility in capital markets, the pandemic and the ongoing decline in financial products could further strain companies’ operating performance, as well as capital requirements.