DBRS Morningstar Releases Commentary on Canadian Insurance Companies’ Recent Debt Issuances

DBRS Morningstar released a commentary titled “Canadian Insurance Companies Maintain Strong Access to Debt Markets Despite the Coronavirus Pandemic” that discusses the drivers of recent debt issuances in anticipation of a tougher economic environment in 2020 and 2021.

The key highlights include:

-- Canadian insurers have issued almost $6.7 billion in debentures and preferred shares so far in 2020, more than tripling the amount issued in 2019.

-- The Canadian insurance industry entered the Coronavirus Disease (COVID-19) pandemic with strong capitalization and financial flexibility.

-- Recent issuances have benefitted from tighter corporate bond spreads, which has allowed insurance companies to issue at a lower cost versus the start of the pandemic.

-- In moderation, DBRS Morningstar views bond issuance as an important tool to improve insurers’ liquidity and navigate the impact of the lockdown measures on the economy.

“DBRS Morningstar notes that Canadian insurers have recently accessed debt markets with tenors up to 15 years and most companies have issued in the 10-year range. This compares well with a maximum tenor of 12 years in 2019 and is supported by DBRS Morningstar-rated insurance issuers’ strong financial flexibility relative to other industries that the coronavirus has affected more directly,” said Marcos Alvarez, Senior Vice President and Head of Insurance at DBRS Morningstar. “We consider that these debt issuances have allowed insurance companies to improve the maturity profile of their liabilities, which is positive for their liquidity position for the rest of 2020,” Alvarez continued.

Notes:
The commentary is available at www.dbrsmorningstar.com.

For more information on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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