A.M. Best Co. has placed its ratings for Aviva Insurance Company of Canada and its affiliates, under review with negative implications due to European exposure.
The rating agency said it’s reviewing the ratings on Aviva Canada (including its affiliates Elite Insurance Company, Pilot Insurance Company, Scottish & York Insurance Company, Limited, S&Y Insurance Company and Traders General Insurance Co.) in the wake of a similar move for its parent company, Aviva plc.
The rating actions on Aviva plc were driven by the company’s exposure to investments in several eurozone economies, Italy in particular, the rating agency said. And, it notes that Aviva Canada’s ratings are inherently tied to those of Aviva plc. The rating actions on Aviva, and other European (re)insurers, “reflect their exposure to the continued deterioration of the sovereign creditworthiness of several eurozone countries and the negative economic outlook for the region.”
A.M. Best says that the ratings for Aviva plc and Aviva Canada will remain under review with negative implications while it examines the parent company’s exposure “to a prolonged adverse economic environment within the eurozone.” Of particular concern, it says, “is the exposure to Italy and Spain’s sovereign bonds and the potential for contagion into other asset classes, particularly holdings of European bank securities.” Additionally, A.M. Best says it will assess the likely impact of “a prolonged financial crisis and recessionary environment on these carriers’ market position and ongoing business operations”.