SVB Breakdown Contains Lessons for the Insurance Industry – AM Best

AM Best said whether these bonds will fail is not yet clear. The implications for equity portfolios could be even more significant, as some major bank stocks have already lost significant value, according to the commentary. Five US insurers have equity exposures concentrated in the banking sector and the broader credit sector that outweigh their capital, and 17 have exposures totaling at least 50% of their equity.

“Many insurers depend on banks for operational aspects, but they are generally not as vulnerable to bank run scenarios, although they can happen as we have seen in the past, and underscore the importance of a strong risk management structure, especially for annuities,” said Jason Hooper, director. Associate for Industry Research and Analytics at AM Best “The Book in the Rising Interest Rate Environment.” “Insurers that perform a detailed analysis of the impact of rising interest rates on their asset-liability portfolios and manage their effects through capital and other risk management tools will fare better in those events than The ones that are managed less.”

read the following: AM Best confirms CopperPoint’s financial strength

SVB focused primarily on high-risk startups, which were affected by rising interest rates and shrinking investment capital, AM Best said. With interest rates soaring over the past year, venture capital firms have found it difficult to obtain financing, and have withdrawn many of their deposits from the bank.

AM Best said that had the US government not intervened to make all depositors complete, the insurers of principals and employees of the owners’ capital insurance, as well as the insured financial institutions that support these entities, could have experienced financial hardship, as they operate with very poor capital. .

“Because startups are inherently more agile and less risk-averse than other companies, their managers and officers often make decisions quickly,” said David Blades, associate director of industry research and analytics at AM Best. “Therefore, the potential for D&O claims to startups was high in the event that the government decided not to help depositors.”

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