A.M. Best Briefing: Puerto Rican Debt Exposure for Insurers is Minimal, But Strong Headwinds Remain

Business Wire

OLDWICK, N.J.--(BUSINESS WIRE)-- Despite the ongoing economic issues in Puerto Rico, the domestic property/casualty (P/C) insurers have managed to generate operating profits over the past 10 years, driven primarily by solid and consistent underwriting performance. In addition, according to an A.M. Best briefing, U.S. legislative efforts that created municipal bankruptcy protection may help to shield those carriers that otherwise would have faced rating pressure.

The Best’s Briefing, “Puerto Rican Debt Exposure for Insurers is Minimal But Strong Headwinds Remain,” notes Puerto Rico’s recent filing for bankruptcy under Title III the Puerto Rico Oversight Management and Economic Stability Act, established by the U.S. Congress in 2016. Despite the Commonwealth’s ongoing debt crisis, Puerto Rico’s P/C insurers effectively have absorbed their exposure to Puerto Rican bond holdings. According to the briefing, from 2013 through 2015, P/C insurers incurred sizable capital losses (realized and unrealized) of approximately $170 million, as evidenced in current depressed valuations. Because of the decline in the valuation of Puerto Rican bonds, island-domiciled companies have worked on improving the quality of their investment portfolios over the past five years.

For these insurers, A.M. best believes the stronger headwinds will revolve around the overall economic malaise and the ongoing demographic pressures given the Commonwealth’s fleeing population. A.M. Best will continue to closely monitor events in Puerto Rico and their potential impact on rated entities.

To access the full copy of this briefing, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=261456.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

View source version on businesswire.com: http://www.businesswire.com/news/home/20170511006146/en/

A.M. Best

Brian O’Larte, +1 908-439-2200, ext. 5138

Associate Director

brian.o'larte@ambest.com

or

Meg Mulry, +1 908-439-2200, ext. 5446

Senior Economist - Economic & Industry Research

meg.mulry@ambest.com

or

Christopher Sharkey, +1 908-439-2200, ext. 5159

Manager, Public Relations

christopher.sharkey@ambest.com

or

Jim Peavy, +1 908-439-2200, ext. 5644

Director, Public Relations

james.peavy@ambest.com