SVB collapse highlights critical lessons for insurance industry
Source: Asia Insurance Review | Apr 2023
Despite US insurance companies’ minimal exposure to bonds issued by the now-shuttered Silicon Valley Bank (SVB), the failure highlights for insurers the importance of managing enterprise, asset-liability and liquidity risks, according to an AM Best commentary.
AM Best associate director of industry research and analytics Jason Hopper, said, “Many insurers depend on
banks for operational aspects, but generally are not as vulnerable to bank run-on scenarios, although they can
occur as we’ve seen in the past and emphasise the importance of a robust risk management structure, especially for annuity writers in a rising interest rate environment.
“Insurers that conduct detailed analysis on the impact of rising interest rates on their asset-liability portfolios and manage their impacts through capital and other risk management tools will fare better in those events than those that are less well-managed,” he said.
The commentary noted that had the US government not stepped in to make all depositors whole, underwriters of D&O insurance for startups and venture capitalists, as well as the financial institution insureds supporting such entities, could have faced financial distress given that they are operating on very thin capital. A