With the credit quality of the U.S. imperiled by the current impasse over raising the debt ceiling, insurance companies are facing increased overall risk on their balance sheets says A.M. Best Co.
The company recently announced the findings of stress testing performed using its proprietary capital model, Best’s Capital Adequacy Ratio (BCAR), which examined what impact a U.S. sovereign downgrade would have on the portfolios and financial strength of U.S. insurance companies. One finding is that insurers will have to reexamine their underwriting leverage, which they may not be able to maintain at historical levels without adversely impacting their financial strength.
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