AMB
Country Risk Report:
Global Summary
September 2009
AMB Country Risk Report: Global Summary
Table of Contents
Rating Analysts
Introduction
1
Edward Easop, Vice President
+1 (908) 439-2200 Ext. 5781
Edward.Easop@ambest.com
Tier Characteristics
2
2
4
6
Andrea Keenan, Managing Senior Financial
Analyst, Country Risk Group
+1 (908) 439-2200 Ext. 5084
Andrea.Keenan@ambest.com
James Gillard, Senior Financial Analyst,
Country Risk Group
+1 (908) 439-2200 Ext. 5818
James.Gillard@ambest.com
Economic Risk
Political Risk
Financial System Risk
Regional Analysis
Asia-Pacific
Central Asia and Eastern Europe
Latin America and Caribbean
Middle East and Northern Africa
North America
Sub-Saharan Africa
Western Europe
Conclusion
8
9
13
16
19
22
25
28
31
AMB Country Risk Report: Global Summary
A.M. Best defines country risk as the risk that country-specific
factors could adversely affect the claims paying ability of an
insurer. Country risk is factored into all A.M. Best ratings. A.M.
Best’s country risk methodology, Assessing Country Risk,
presents the country risk evaluation process and describes how
country risk is integrated into Best’s Credit ratings. On April 8, 2009, the new country risk methodology and Country
Risk Tiers (CRTs) were released. On that date, implementation
of the new methodology commenced. Both are available at
www.ambest.com. On August 31, 2009 a new release of the Country Risk Tiers was
published, marking the start of an annual cycle that will culminate with a revised list of CRTs and updated AMB Country Risk
Reports being released at the end of August each year. The 75 countries evaluated by A.M. Best are listed according to
their Country Risk Tier in the table to the right. Two countries
changed Tiers since the last release in April. Antigua & Barbuda
moved from a CRT-3 to a CRT-4 and Bosnia and Herzegovina
moved from a CRT-4 to a CRT-5.
The purpose of this report is to supplement the methodology,
summarize the output of the A.M. Best Country Risk Model, and
identify the characteristics exhibited by each of the peer groups. It therefore also serves as a compilation of the information that
can be found in the individual AMB Country Risk Reports that
are available on the A.M. Best website.
The report is broken down into two main parts. The first section
discusses economic, political, financial and insurance statistics
of countries in a given tier. The second looks at the countries in a
regional context. This report does not provide analysis beyond the results of the
country risk evaluation process. More detailed studies on specific
insurance industries or markets are available as Special Reports at
www.ambest.com.
CRT-1
Australia
Austria
Canada
Denmark
Finland
France
Germany
Gibraltar*
Guernsey*
Isle of Man*
Luxembourg
Netherlands
Norway
Singapore
Sweden
Switzerland
United Kingdom
United States
CRT-2
Barbados*
Belgium
Bermuda
British Virgin
Islands*
Cayman Islands*
Hong Kong
Italy
Ireland
Japan
Liechtenstein*
Macau
New Zealand
Slovenia
South Korea
Spain
Taiwan
CRT-3
Bahamas*
Bahrain
China
Cyprus
Israel
Kuwait
Malaysia
Mexico
Netherlands
Antilles*
Oman
Poland
Qatar
Saudi Arabia
South Africa
Thailand
Trinidad and
Tobago
United Arab
Emirates
CRT-4
Antigua &
Barbuda*
Brunei Darussalam
Egypt
India
Indonesia
Jamaica
Jordan
Kazakhstan
Mauritius
Morocco
Panama
Philippines
Russia
Tunisia
Turkey
CRT-5
* Denotes Countries to be considered “Special Cases” by A.M. Best. For an explanation
of a “special case” and more information on the Country Risk Methodology please see
Assessing Country Risk at: http://www.ambest.com/ratings/countryrisk.pdf.
1
Belarus
Bosnia and
Herzegovina
Dominican Republic
Ghana
Copyright © 2009 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
Kenya
Lebanon
Nigeria
Ukraine
Vietnam
AMB Country Risk Report: Global Summary
Tier Characteristics
This section of the report examines the general characteristics typical to a country in a
given tier. It is organized to match the 3 broad categories of risk outlined in the country
risk methodology. These categories of risk are (1) Economic Risk; (2) Political Risk and
(3) Financial System (both non-insurance and insurance) Risk. As there are only five categories of country risk, significant differences can be seen,
on average, from one tier to the next. On average, insurers domiciled or operating in
countries classified as CRT-3, CRT-4 or CRT-5, tend to be impacted more by country
risk than those insurers domiciled or operating in CRT-1 or CRT-2 countries. However,
differentiation between countries in CRT-1 and CRT-2 is necessary as an important line
exists between those countries that are relatively low risk compared to those that are
stable and well diversified but have some significant weaknesses.
Economic Risk
Economic risk is the likelihood that fundamental weaknesses in a country’s economy
will cause adverse developments for an insurer. A.M. Best’s assessment of economic
risk evaluates the state of the domestic economy, government finances and
international transactions, as well as prospects for growth and stability. In deriving economic risk, A.M. Best’s country risk model employs a weighted average
of scores calculated from economic variables. The final result categorizes countries’
economic risk into one of five levels of risk, ranging from Very Low to Very High. Below is a
summary of the results. Note: April’s model results are included in parenthesis if different
from current results.
As the above table illustrates, economic risk typically is very low in CRT-1 countries and
high in CRT-5 countries. Comparing the current results with those published in April
we can see that in general the level of economic risk has risen. To illustrate the results,
Figures 1 and 2 below are average values in each tier of two of the most significant
indicators of economic risk; overall wealth and economic size.
2
Copyright © 2009 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
AMB Country Risk Report: Global Summary
Figure 1
GDP Per Capita
One of the most telling indicators in A.M.
Best’s assessment of economic risk is
gross domestic product (GDP) per capita. Figure 1 shows the average GDP per capita
in countries in CRT-1 through CRT-5. The
numbers are a simple arithmetic average
and have not been GDP-weighted. In
addition, special cases have been removed
as economic risk is captured differently
for these countries and their inclusion in
the average would distort the results in an
uninformative way.
$70,000
$60,000
$57,209
$50,000
$40,000
$35,932
USD
Wealth
$30,000
$25,651
$20,000
$7,442
$10,000
$3,509
$0
C R T -1
C R T -2
C R T -3
C R T -4
C R T -5
Source: IMF World Economic Outlook
Figure 2 shows the average size of an
economy (as measured by nominal GDP
in US dollars) by Country Risk Tier. Again
these are simple averages and special
cases have been removed.
Countries in higher tiers [CRT-1 being the
highest] are generally (on average) larger
and more wealthy than countries in lower
tiers [CRT-5 being the lowest]. And while
many other indicators are used in the
assessment of economic risk, these two,
particularly GDP per capita, are highly
illustrative of the level of economic risk. Figure 2
Gross Domestic Product (Billions, USD)
$2,500
$2,000
$1,971
$1,500
B illio n s, U S D
Size
$1,036
$1,000
$541
$500
$343
$76
$0
C R T -1
C R T -2
C R T -3
C R T -4
Source: IMF World Economic Outlook
3
Copyright © 2009 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
C R T -5
AMB Country Risk Report: Global Summary
Political Risk
Political risk is the likelihood that government or bureaucratic inefficiencies,
societal tensions, inadequate legal system or international tensions will cause
adverse developments for an insurer. Political risk comprises the stability of a
government and society, the effectiveness of international diplomatic relationships,
the reliability and integrity of the legal system and of the business infrastructure,
the efficiency of the government bureaucracy and the appropriateness and
effectiveness of the government’s economic policies.
As was the case with economic risk, each country’s political risk is scored from
Very Low to Very High. The following table shows the distribution of these scores
across tiers. Note: April’s model results are included in parenthesis if different from
current results.
Political Risk Summary
The Political Risk Summary is a radar chart that summarizes portions of the model output
on Political Risk and is included on each AMB Country Risk Report published. It provides
the scores for some of the major categories of political risk. The chart displays a score of
1-5 for 9 different aspects of political risk with 1 being the lowest level of risk and 5 being
the highest. The points on the chart are defined as follows.
• International Transactions Policy – measures the effectiveness of the exchange rate
regime and currency management.
• Monetary Policy – measures the ability of a country to effectively implement
monetary policy.
• Fiscal Policy – measures the ability of a country to effectively implement fiscal
policy.
• Business Environment – measures the overall quality of the business environment,
and ease of doing business.
• Labor Flexibility – measures the flexibility of the labor market, including a
company’s ability to hire and fire employees.
• Government Stability – measures the degree of stability in the government.
• Social Stability – measures the degree of social stability including human
development and political rights.
• Regional Stability – measures the degree of stability in the region.
• Legal System – measures the transparency and level of corruption in a legal system.
4
Copyright © 2009 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
AMB Country Risk Report: Global Summary
Figure 3
Political Risk Summary across Country Risk Tiers
Score 1 (best) to 5 (worst)
International T ransactions P olicy
5
Legal S ystem
4
C R T -1
C R T -2
C R T -3
C R T -4
C R T -5
M onetary P olicy
3
2
1
R egional S tability
F iscal P olicy
0
S ocial S tability
B usiness E nvironm ent
G overnm ent S tability
Labor F lexibility
Source: A.M. Best
5
Copyright © 2009 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
AMB Country Risk Report: Global Summary
Financial System Risk
Financial system risk (non-insurance) is the risk that financial volatility may erupt due to
inadequate reporting standards, weak banking systems or asset markets or poor regulatory
structure. Non-insurance financial system risk considers a country’s banking system,
accounting standards and government finances, and it assesses how vulnerable the financial
system is to external or internal volatility. Basel II, World Bank Insolvency Principles and
International Accounting Standards all are referenced in the analysis, as are the performances
of banks, equity indices and fixed-income securities. Insurance risk is the risk that the insurance
industry’s levels of development and public awareness; transparency and effectiveness of
regulation; reporting standards; and regulatory sophistication will contribute to a volatile
financial system and compromise an insurer’s ability to pay claims. The assessment is based
heavily on the Insurance Core Principles (ICP) of the International Association of Insurance
Supervisors (IAIS). A.M. Best employs a sizable subset of the 28 ICPs by organizing them
into three categories: 1) government commitment to an open and well-regulated insurance
industry, 2) adequacy of supervisory authority and its supporting infrastructure, and 3) insurer
accountability.
As was the case with economic and political risk, each country’s financial system risk is scored
from Very Low to Very High. The following table shows the distribution of these scores across
tiers. Note: April’s model results are included in parenthesis if different from current results.
Financial system risk is lower in CRT-1, CRT-2 and CRT-3 than it is in CRT-4 and CRT-5. In
addition there is a pronounced shift in the scores, particularly in the CRT-5 countries. Scores have risen and it is clear that the global financial turmoil of the past year has
increased the amount of financial system risk in many of the countries being evaluated. Financial system risk is a combination of non-insurance financial system risk and insurance
risk. Factors involved in the assessment of this risk are diverse and include financial
market performance, regulatory compliance, banking system soundness and adherence to
insurance core principles. As such, there is not one indicator that can simply be averaged
across tiers to illustrate financial system risk.
6
Copyright © 2009 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
AMB Country Risk Report: Global Summary
To illustrate the relationship identified
between development of a financial
system infrastructure and maturity of
an insurance industry, it is interesting
to illustrate a comparison of the ratio of
total premiums written to gross domestic
product across tiers (and then regions). This number is not a direct input to the
Country Risk Model. This number was
calculated by averaging total premiums
across the tier and dividing by the average
GDP in the tier. Figure 4
Total Premiums/Gross Domestic Product
10%
9.2%
9%
8.7%
8%
7%
6%
5%
4%
3.4%
There is a very large drop off in this ratio
from CRT-2 to CRT-3, illustrating that the
typical CRT-1 and CRT-2 country has a
developed and mature insurance industry
while the other tiers represent more
emerging markets.
3%
2.5%
2%
1.6%
1%
0%
C R T -1
C R T -2
C R T -3
C R T -4
Source: IMF World Economic Outlook, Swiss Re and A.M. Best
7
Copyright © 2009 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
C R T -5
AMB Country Risk Report: Global Summary
Regional Analysis
The second part of this report looks at the same data and information but rather than
aggregate it by Country Risk Tier, it will be aggregated by region. For the following analysis
each country is placed into one of seven regions as follows.
Asia-Pacific
Australia
Brunei Darussalam
China
Hong Kong
India
Indonesia
Japan
Macau
Central Asia and Eastern Europe
Malaysia
New Zealand
Philippines
Singapore
South Korea
Taiwan
Thailand
Vietnam
Belarus
Bosnia and
Herzegovina
Kazakhstan
Latin America and Caribbean
Antigua and Barbuda*
Bahamas*
Barbados*
British Virgin Islands*
Cayman Islands*
Dominican Republic
Jamaica
Mexico
Netherlands Antilles*
Panama
Trinidad and Tobago
Middle East and Northern Africa
Bahrain
Cyprus
Egypt
Israel
Jordan
Kuwait
Lebanon
North America
Bermuda*
Canada
United States
Poland
Russia
Slovenia
Ukraine
Morocco
Oman
Qatar
Saudi Arabia
Tunisia
Turkey
United Arab Emirates
Sub-Saharan Africa
Ghana
Kenya
Mauritius
Nigeria
South Africa
Western Europe
Austria
Belgium
Denmark
Finland
France
Germany
Gibraltar*
Guernsey*
Ireland
Isle of Man*
Italy
Liechtenstein*
Luxembourg
Netherlands
Norway
Spain
Sweden
Switzerland
United Kingdom
* Denotes Countries to be considered “Special Cases” by A.M. Best. For an explanation of a “special case” and
more information on the Country Risk Methodology please see Assessing Country Risk at: http://www.ambest.
com/ratings/countryrisk.pdf. 8
Copyright © 2009 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
DenotesSummary
Countries to be considered “Special Cases” by A.M. Best. For an explanation of a “special case”
AMB Country Risk Report:*Global
and more information on the Country Risk Methodology please see Assessing Country Risk at:
http://www.ambest.com/ratings/countryrisk.pdf.
Thefollowing
followingchart
chartdescribes
describesthe
the distribution
distribution of
The
of Country
Country Risk
Risk Tier
Tier assignments
assignmentsacross
across
each
region.
Note:
numbers
in
parenthesis
are
April’s
results
if
different
from current
current
each region. Note: numbers in parenthesis are April’s results if different from
results.
results.
Region
Asia-Pacific
Central Asia and
Eastern Europe
Latin America
and Caribbean
Middle East and
Northern Africa
North America
Sub-Saharan
Africa
Western Europe
Total
CRT-1
2
Country Risk Tier by Region
CRT-2
CRT-3
CRT-4
6
3
4
CRT-5
1
Total
16
0
1
1
2 (3)
3 (2)
7
0
3
4 (5)
3 (2)
1
11
0
0
8
5
1
14
2
1
0
0
0
3
0
0
1
1
3
5
14
18
5
16
0
17(18)
18
0
15
0
9(8)
8
19
75
The majority of the CRT-1 countries are located in North America and Western Europe. The
tiersofare
evenly
distributed
across
regions. Two
countries
Theother
majority
themore
CRT-1
countries
are located
in the
North
America and
Westernchanged
Europe.
Country
Risk
Tiers
this cycle. Bosnia
and Herzegovina,
in Eastern
Europe,
moved
The other
tiers
are during
more evenly
distributed across
the regions. Two
countries
changed
from
a CRT-4
CRT-5
and Antigua
andBosnia
Barbuda,
the Caribbean,
moved from
a CRT-3 to
Country
RisktoTiers
during
this cycle.
andinHerzegovina,
in Eastern
Europe,
a moved
CRT-4. from a CRT-4 to CRT-5 and Antigua and Barbuda, in the Caribbean, moved from
a CRT-3 to a CRT-4.
The remainder of this section will walk through each region. Each regional section
will start with a brief regional comment [originally published in the AMB Country Risk
The remainder of this section will walk through each region. Each regional section will
Reports] and then discuss the performance of the region in the three categories of risk
start with a brief regional comment [originally published in the AMB Country Risk
that have previously been identified.
Reports] and then discuss the performance of the region in the three categories of risk
that have previously been identified.
Asia-Pacific
Asia-Pacific
Asia-Pacific
canbebebroken
brokendown
downinto
intofour
foursub-regions.
sub-regions.
Asia-Pacific
can
EasternAsia
Asia
Eastern
•
Eastern Asia is home to some of the world’s largest and most advanced
economies.
Chinatoand
Japan
are world’s
both in the
world’s
five
countrieseconomies. measured
• Eastern
Asia is home
some
of the
largest
and top
most
advanced
by
gross
domestic
product
(GDP).
China and Japan are both in the world’s top five countries measured by gross domestic
product
(GDP).
• In the
aftermath of the Southeast Asian financial crisis in the late 1990s, much of
the region underwent a restructuring of traditional economic and financial
• In the
aftermath
of theinternational
Southeast Asian
in the late 1990s, much of the
practices
to match
best financial
practices crisis
in regulation.
region underwent a restructuring of traditional economic and financial practices to
match international best practices in regulation.
8
• The region as a whole is facing the prospect of economic contraction in 2009 but
growth is expected to return in 2010.
9
Copyright © 2009 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
AMB Country Risk Report: Global Summary
Oceania
•
The region as a whole is facing the prospect of economic contraction in 2009 but
• Oceania,
whose
largest to
two
nations,
Australia and New Zealand, make up the vast
growth
is expected
return
in 2010.
majority of economic activity, is located in the South Pacific Ocean. Australia and New
Zealand have strong political and cultural ties with the United Kingdom.
Oceania
• Oceania, whose largest two nations, Australia and New Zealand, make up the vast
• Australia and New Zealand have close economic ties with Southeast Asia and in 2009
majority of economic activity, is located in the South Pacific Ocean. Australia and
ASEAN-Australia and New Zealand Free Trade Area (AANZFTA) was established.
New Zealand have strong political and cultural ties with the United Kingdom.
• Australia
and Newslowdown
Zealand have
close economic
tiesas
with
Asia
and in
• The
global economic
is impacting
the region
theSoutheast
economies
of both
2009
ASEAN-Australia
and
New
Zealand
Free
Trade
Area
(AANZFTA)
was
Australia and New Zealand are set to contract in 2009. established.
•
The global
South Central
Asia economic slowdown is impacting the region as the economies of both
Australia and New Zealand are set to contract in 2009.
• The region of South Central Asia, comprising the countries south of the Himalayans, is dominated
in population and economic size by India.
South
Central Asia
• The region of South Central Asia, comprising the countries south of the
• Strategic
in location
as it is bordered
by China,
Asia
and
Middle East, this
Himalayans,
is dominated
in population
and Central
economic
size
bythe
India.
region
containsina location
cross section
culturesby
and
histories
andAsia
is prone
to periods
• Strategic
as it isofbordered
China,
Central
and the
Middle of
East,
regional
instability,
particularly
between
Pakistan
and
India.
this region contains a cross section of cultures and histories and is prone to
periods of regional instability, particularly between Pakistan and India.
• Much of South Central Asia had been colonized by the United Kingdom prior to
• Much of South Central Asia had been colonized by the United Kingdom prior to
World War II. A strong relationship between the subcontinent and the UK remains.
World War II. A strong relationship between the subcontinent and the UK
Southeastremains.
Asia
Southeast
AsiaAsia is a critical part of the world trading system and while the region’s
• Southeast
•
Southeast
Asia
is a critical
part of the
tradingmanufacturing
system and while
region’s
economies remain
somewhat
dependent
onworld
agriculture,
andthe
services
economies
remain
somewhat
dependent
on
agriculture,
manufacturing
and
have been the engine for growth.
services have been the engine for growth.
• 2009-2010
are forecasted
to betovery
difficult
times
for the
forecasts
• 2009-2010
are forecasted
be very
difficult
times
for region. In
the region.fact
In fact
suggest
these should
the worst
Asian
financial
crisis
in 1997-1998. forecasts
suggestbethese
shouldyears
be thesince
worstthe
years
since
the Asian
financial
crisis
With the
economies of
their
tradingof
partners
slowing
significantly
(notably U.S.
in 1997-1998.
With
thelarge
economies
their large
trading
partners slowing
and Europe)
demand
for exports
is plummeting
and leading
to economic
contraction
significantly
(notably
U.S. and
Europe) demand
for exports
is plummeting
and
acrossleading
the region. At
the
same
time
as
global
credit
tightens,
the
amount
of
foreign
to economic contraction across the region. At the same time as global
directcredit
investment
flowing
into the
is drying
up. flowing into the
tightens,
the amount
ofeconomies
foreign direct
investment
economies is drying up.
Risk Category
Economic
Political
Financial System
Very Low
1 (3)
2 (4)
4 (5)
Asia-Pacific
Low
Moderate
7 (6)
6 (5)
6 (4)
3 (2)
5 (4)
3
High
2
5 (6)
2 (3)
Very High
0
0
2 (1)
Economic Risk
Since the last release of Country Risk Tiers, in April, the level of economic risk in the
region has risen. In April three countries displayed very low levels of economic risk,
now there is only one (Australia).
10
9
Copyright © 2009 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
AMB Country Risk Report: Global Summary
Economic Risk
Figure 5
GDP Per Capita
Since the last release of Country Risk Tiers,
in April, the level of economic risk in the
region has risen. In April three countries
displayed very low levels of economic risk,
now there is only one (Australia). $70,000
$60,000
$50,000
$40,000
USD
Figure 5 shows the level of per capita GDP
in the Asia-Pacific region as it compares
to the averages for each tier average. In
terms of GDP per capita the region, as a
whole, is similar to the CRT-3 average. This
is not surprising given the distribution
of tiers in the region. The wealthiest (in
terms of GDP per capita) countries in the
region are Australia, Macau and Singapore
while the poorest are Vietnam and India. $30,000
$20,000
$10,000
$0
C R T -1
C R T -2
C R T -3
A sia-P acific
C R T -4
C R T -5
C R T -4
C R T -5
Source: IMF World Economic Outlook
Figure 6 shows gross domestic product
for the same set of countries. In terms of
economic size the region on average is
larger than the average CRT-3 country but
smaller than the average CRT-2 country. The region boasts two of the three largest
(in terms of nominal GDP) economies in the
world with Japan and China. Macau and
Brunei Darussalam are very small countries
and the two smallest in the region. Figure 6
Gross Domestic Product (Billions, USD)
$2,500
$2,000
B illio n s, U S D
$1,500
$1,000
$500
$0
C R T -1
C R T -2
A sia-P acific
C R T -3
Source: IMF World Economic Outlook
11
Copyright © 2009 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
AMB Country Risk Report: Global Summary
Political Risk
Figure 7
Political Risk Summary – Asia-Pacific
Figure 7 compares the components of
political risk in Asia-Pacific to the averages
for each Country Risk Tier. Score 1 (best) to 5 (worst)
Again not surprisingly, given the
distribution of scores, on average countries
in the Asia-Pacific score worse than the
average CRT-2 country but better than the
average CRT-3 country. Australia and New
Zealand score the best in the region in
terms of political risk. International T ransactions P olicy
5
4
Legal S ystem
C R T -5
C R T -4
C R T -3
C R T -2
C R T -1
A sia-P acific
M onetary P olicy
3
2
1
R egional S tability
F iscal P olicy
0
S ocial S tability
B usiness E nvironm ent
G overnm ent S tability
Labor F lexibility
Source: A.M. Best
Financial System Risk
The final category of risk to be examined
is financial system risk. In Asia-Pacific,
relative to other types of risk, financial
system risk is the most widely distributed
category with scores ranging from very
high to very low. Countries in the region with the most
premiums written as a percent of GDP
include Hong Kong, South Korea and
Taiwan while Vietnam, Indonesia and The
Philippines are among the lowest. Figure 8
Total Premiums/Gross Domestic Product
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
C R T -1
C R T -2
A sia-P acific
C R T -3
C R T -4
Source: IMF World Economic Outlook, Swiss Re and A.M. Best
12
Copyright © 2009 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
C R T -5
AMB Country Risk Report: Global Summary
Figure 8: Total Premiums/Gross Domestic Product
Source: IMF World Economic Outlook, Swiss Re and A.M. Best
Central
Eastern
Europe
CountriesAsia
in theand
region
with the
most premiums written as a percent of GDP include
This
region
is South
made up
of two
Central
AsiaIndonesia
and Eastern
Hong
Kong,
Korea
andsub-regions,
Taiwan while
Vietnam,
andEurope. The Philippines are
among the lowest.
Central Asia
Central Asia and Eastern Europe
• The Central Asian countries surrounding the Caspian Sea, with the exception of Iran,
are all at various stages of transition since the collapse of the Union of Soviet and
This
region is made up of two sub-regions, Central Asia and Eastern Europe.
Socialist Republics (U.S.S.R.). All Central Asian countries evaluated by A.M. Best have
high risk scores for political risk.
Central Asia
• transition
The Central
Asian had
countries
the Caspian
Sea,presence
with theofexception
• The
process
been surrounding
further complicated
by the
major of
Iran,and
are natural
all at various
stages of transition
since
the collapse
the Union
of
petroleum
gas resources,
the politics
surrounding
theof
export
of those
Soviet
and
Socialist
Republics
(U.S.S.R.).
All
Central
Asian
countries
evaluated
resources, and continuing historical and ethnic tensions.
by A.M. Best have high risk scores for political risk.
•
The transition
process
had
been further
complicated
by the
presence
of major
• Oil exporters
and those
that
financed
domestic
lending with
foreign
capital
are under
petroleum
and
natural
gas
resources,
the
politics
surrounding
the
export
of thoseto
significant financial strain in this region, and global forecasts have been downgraded
suggestresources,
economicand
contraction
the region.
continuingacross
historical
and ethnic tensions.
• Oil exporters and those that financed domestic lending with foreign capital are
Eastern Europe
under significant financial strain in this region, and global forecasts have been
downgraded to suggest economic contraction across the region.
• Eastern European countries are all at various stages of transition since the collapse of
the Union
of Soviet and Socialist Republics (U.S.S.R.). For most, the transition process
Eastern
Europe
involved the adoption of entirely new regulatory, legal and economic philosophies while
• Eastern European countries are all at various stages of transition since the collapse
combating cultural and / or historical tensions.
of the Union of Soviet and Socialist Republics (U.S.S.R.). For most, the
transitionasprocess
involved
the countries,
adoption ofsome
entirely
new
regulatory,
legal and
• All classified
“emerging
market”
have
managed
to achieve
a great
combating
cultural and those
/ or historical
tensions.
deal ofeconomic
economicphilosophies
stability andwhile
political
power, particularly
that have
secured
• All classified
as “emerging
market”
countries,
somethe
have
managed to achieve a
membership
in the European
Union
(EU) and
some, even
euro-zone.
great deal of economic stability and political power, particularly those that have
secured
membership
in thedeal
European
Unionand
(EU)
and some,
even
euro-zone.
• Eastern
Europe
shows a great
of potential
in recent
years
hasthe
been
a favorite
•
Eastern
Europe
shows
a
great
deal
of
potential
and
in
recent
years
has
been a
region for foreign investors from developed nations.
favorite region for foreign investors from developed nations.
Risk Category
Economic
Political
Financial System
Central Asia and Eastern Europe
Very Low
Low
Moderate
0
1
3 (4)
0
1
1
0
2
0
High
3 (2)
5
3
11
13
Copyright © 2009 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
Very High
0
0
2
AMB Country Risk Report: Global Summary
Economic Risk
Figure 9
GDP Per Capita
Figure 9 illustrates the average wealth
of countries in this region. On average
countries in this region are just slightly
wealthier than the average CRT-4 country. Slovenia has a significantly higher GDP per
capita than the rest of its regional peers,
while Ukraine and Bosnia and Herzegovina
have the lowest in the region. $70,000
$60,000
$50,000
USD
$40,000
$30,000
$20,000
$10,000
$0
C R T -1
C R T -2
C R T -3
C entral A sia and
E astern E urope
C R T -4
C R T -5
C R T -4
C R T -5
Source: IMF World Economic Outlook
Figure 10 illustrates the average wealth
of countries in this region. Again on
average countries in this region are of
similar economic size to the average CRT4 country. The average is clearly brought
up by the inclusion of Russia which is
three times as large as the second biggest
country in the region. Figure 10
Gross Domestic Product (Billions, USD)
$2,500
$2,000
B illio n s, U S D
$1,500
$1,000
$500
$0
C R T -1
C R T -2
C R T -3
C entral A sia and
E astern E urope
Source: IMF World Economic Outlook
14
Copyright © 2009 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
AMB Country Risk Report: Global Summary
Political Risk
Figure 11
Political Risk Summary – Central Asia and Eastern
Figure 11 shows political risk in the region. Europe
Countries in the region score between CRT-3 and CRT-4 on average with particular
weakness in fiscal policy efficiency. Slovenia scores better than the rest of the
region in terms of political risk.
Score 1 (best) to 5 (worst)
C R T -5
C R T -4
C R T -3
C R T -2
C R T -1
C entral A sia and E astern E urope
International T ransactions P olicy
5
4
Legal S ystem
M onetary P olicy
3
2
1
R egional S tability
F iscal P olicy
0
S ocial S tability
B usiness E nvironm ent
G overnm ent S tability
Labor F lexibility
Source: A.M. Best
Financial System Risk
Figure 12 illustrates total premiums as
a percent of GDP. Belarus, Bosnia and
Herzegovina and Kazakhstan have the
lowest ratio in the region while Slovenia
and Poland have the highest.
Figure 12
Total Premiums/Gross Domestic Product
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
C R T -1
C R T -2
C R T -3
C entral A sia and
E astern E urope
C R T -4
Source: IMF World Economic Outlook, Swiss Re and A.M. Best
15
Copyright © 2009 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
C R T -5
AMB Country Risk Report: Global Summary
Latin America and Caribbean
This region combines Latin America and the Caribbean sub-regions.
Latin America
Latin America and Caribbean
• The entire region is feeling the weight of the global economic decline as reliance
on exports
to developed
particularly
the United
States – and reliance on
This
region combines
Latincountries
America –and
the Caribbean
sub-regions.
commodity industries and tourism will result in growth decelerations if not economic
contractions
Latin
America in 2009. Weathering the storm will depend greatly on sound government
policies
and
institutions.
• The
entire
region is feeling the weight of the global economic decline as reliance
on exports to developed countries – particularly the United States – and reliance
• Forecasts
for growth
in all of Latin
America
areresult
beinginrevised
– inifmany
on commodity
industries
and tourism
will
growthdownward
decelerations
not
cases predicting a sharp region-wide contraction.
economic contractions in 2009. Weathering the storm will depend greatly on
sound government policies and institutions.
• The Latin American insurance industry is dominated by Mexico and Brazil, who
•
Forecasts
growth in
all of Latin
represent
63% offor
premiums
written
in theAmerica
region. are being revised downward – in
many cases predicting a sharp region-wide contraction.
• The Latin American insurance industry is dominated by Mexico and Brazil, who
represent 63% of premiums written in the region.
Caribbean
Caribbean
• countries
The countries
of Caribbean
the Caribbean
in cultural
origin,
economic
foundation
• The
of the
varyvary
in cultural
origin,
economic
foundation
andand
population
affluence. However,
in all cases,
their long-term
growthgrowth
and stability
is
population
affluence. However,
in all cases,
their long-term
and stability
highly is
dependent
upon their
larger
neighbors.
highly dependent
upon
theirregional
larger regional
neighbors.
• As much of the Caribbean relies upon tourism revenues from nationals of
• As much
of the countries,
Caribbeanparticularly
relies uponthe
tourism
from nationals
developed
Unitedrevenues
States, economic
growthofisdeveloped
suffering
countries,
particularly the United States, economic growth is suffering in 2009.
in 2009.
• The Caribbean financial services sectors will be affected by the current global
• The Caribbean financial services sectors will be affected by the current global
financial crisis. The exact impact is yet to be determined as the trend of
financial crisis. The exact impact is yet to be determined as the trend of nationalizations
nationalizations and consolidations in finance companies and the collapsing of
and consolidations in finance companies and the collapsing of hedge funds continues.
hedge funds continues.
Risk Category
Economic
Political
Financial System
Latin America and Caribbean
Very Low
Low
Moderate
0
4
4 (5)
0
4 (6)
6 (4)
0
5 (6)
3 (2)
High
2 (1)
1
2
Very High
1
0
1
Economic Risk
Note that for the first time in the figures on GDP Per Capita and GDP the special cases in
the Caribbean are included. This is because they make up a very large part of the region
and are representative of the region. Figure 13 illustrates the average wealth of countries
in this region. The wealthiest countries in the region include the Cayman Islands and the
British Virgin Islands, while the least wealthy are the Dominican Republic and Jamaica.
Figure 13: GDP Per Capita
Source: IMF World Economic Outlook
Figure 14: Gross Domestic Product (Billions, USD)
16
Copyright © 2009 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
13
AMB Country Risk Report: Global Summary
Note that for the first time in the figures
on GDP Per Capita and GDP the special
cases in the Caribbean are included. This
is because they make up a very large part
of the region and are representative of the
region. Figure 13 illustrates the average
wealth of countries in this region. The
wealthiest countries in the region include
the Cayman Islands and the British Virgin
Islands, while the least wealthy are the
Dominican Republic and Jamaica. Figure 13
GDP Per Capita
$70,000
$60,000
$50,000
$40,000
USD
Economic Risk
$30,000
$20,000
$10,000
$0
C R T -1
C R T -2
C R T -3
Latin A m erica and
C aribbean
C R T -4
C R T -5
Latin A m erica and
C aribbean
C R T -5
Source: IMF World Economic Outlook
Figure 14
Gross Domestic Product (Billions, USD)
$2,500
$2,000
$1,500
B illio n s, U S D
Figure 14 shows the average economic
size of a country in Latin America and
the Caribbean. The average is small
and similar to a CRT-5 country, but this
actually understates how small most of
the countries in the region are. Many of
the islands of the Caribbean are among
the smallest countries assigned Country
Risk Tiers and the regional average is
drastically increased by the inclusion
of Mexico. Nevertheless, these small
economies are largely island countries with
small populations, helping to maintain a
relatively high GDP per capita.
$1,000
$500
$0
C R T -1
C R T -2
C R T -3
C R T -4
Source: IMF World Economic Outlook
17
Copyright © 2009 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
AMB Country Risk Report: Global Summary
Political Risk
Figure 15 shows that political risk scores
in the region are, on average, between CRT2 and CRT-3. Barbados, the British Virgin
Islands, Cayman Islands and the Bahamas
display the lowest levels of political risk,
while the Dominican Republic has the
highest level. Figure 15
Political Risk Summary – Latin America and Caribbean
Score 1 (best) to 5 (worst)
C R T -1
C R T -2
C R T -3
C R T -4
C R T -5
Latin A m erica and C aribbean
International T ransactions P olicy
5
4
Legal S ystem
M onetary P olicy
3
2
1
R egional S tability
F iscal P olicy
0
S ocial S tability
B usiness E nvironm ent
G overnm ent S tability
Labor F lexibility
Source: A.M. Best
Financial System Risk
Figure 16 illustrates total premiums as a
percent of GDP. The average for the region
is between the average for CRT-4 and CRT5. The highest percentage in the region
includes the Bahamas while the Dominican
Republic and Mexico are among the lowest. Figure 16
Total Premiums/Gross Domestic Product
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
C R T -1
C R T -2
C R T -3
C R T -4
Latin A m erica and
C aribbean
Source: IMF World Economic Outlook, Swiss Re and A.M. Best
18
Copyright © 2009 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
C R T -5
AMB Country Risk Report: Global Summary
Middle
and Northern
Middle
East East
and Northern
Africa Africa
•
The Middle East & North Africa region includes several wealthy oil producing
• The Middle East & North Africa region includes several wealthy oil producing nations
nations
and is characterized
regionaland
instability
and
periodsviolence.
of regional
and
is characterized
by regionalby
instability
periods of
regional
violence.
• • After
Aftermore
morethan
thanfive
five
years
rapid
expansion,
driven
primarily
a boom
oil
years
of of
rapid
expansion,
driven
primarily
by a by
boom
in oil in
prices,
theprices,
outlook
the Middle
EastMiddle
& North
Africa
regionAfrica
has become
theforoutlook
for the
East
& North
regionmore
has pessimistic. become more
pessimistic.
Bank
forecasting
oil prices
to remain
below
their their
peak peak
levelslevels
for thefor
• • With
Withthe
theWorld
World
Bank
forecasting
oil prices
to remain
below
foreseeable future, the region will continue to face economic challenges.
the foreseeable future, the region will continue to face economic challenges.
• • In
Inaddition
additiontotofalling
falling
prices,
global
economic
slowdown
has impacted
oiloil
prices,
thethe
global
economic
slowdown
has impacted
the the
region
through
reduced
tourism
and
tightening
credit
conditions.
region through reduced tourism and tightening credit conditions.
Risk Category
Economic
Political
Financial System
Middle East and Northern Africa
Very Low
Low
Moderate
0
3 (4)
6 (5)
0
0 (1)
9 (8)
0
5 (7)
3 (1)
High
5
5
5
Very High
0
0
1
Economic Risk
Figure 17 illustrates the average wealth of countries in the region. The levels of wealth in
the region vary widely from those in the rich oil producing states of the Gulf Cooperation
Council (GCC) to the less wealthy countries of Northern Africa. The average GDP per
capita for the GCC - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab
Emirates - is approximately USD 35,000, between the average for CRT-1 and CRT-2.
Figure 17: GDP Per Capita
Source: IMF World Economic Outlook
Figure 18 shows the average economic size of countries in the Northern Africa and
Middle East region. The countries in this region are small, similar to the average for
CRT-5. Turkey is the largest country (in terms of gross domestic product) in the region
followed by Saudi Arabia. The smallest include Bahrain, Cyprus, Jordan and Lebanon.
Figure 18: Gross Domestic Product (Billions, USD)
Source: IMF World Economic Outlook
19
15
Copyright © 2009 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
AMB Country Risk Report: Global Summary
Figure 17 illustrates the average wealth
of countries in the region. The levels of
wealth in the region vary widely from
those in the rich oil producing states of
the Gulf Cooperation Council (GCC) to
the less wealthy countries of Northern
Africa. The average GDP per capita for the
GCC - Bahrain, Kuwait, Oman, Qatar, Saudi
Arabia and the United Arab Emirates - is
approximately USD 35,000, between the
average for CRT-1 and CRT-2. Figure 17
GDP Per Capita
$70,000
$60,000
$50,000
$40,000
USD
Economic Risk
$30,000
$20,000
$10,000
$0
C R T -1
C R T -2
C R T -3
M iddle E ast and
N orthern A frica
C R T -4
C R T -5
M iddle E ast and
N orthern A frica
C R T -5
Source: IMF World Economic Outlook
Figure 18
Gross Domestic Product (Billions, USD)
$2,500
$2,000
$1,500
B illio n s, U S D
Figure 18 shows the average economic
size of countries in the Northern Africa
and Middle East region. The countries in
this region are small, similar to the average
for CRT-5. Turkey is the largest country
(in terms of gross domestic product) in
the region followed by Saudi Arabia. The
smallest include Bahrain, Cyprus, Jordan
and Lebanon. $1,000
$500
$0
C R T -1
C R T -2
C R T -3
C R T -4
Source: IMF World Economic Outlook
20
Copyright © 2009 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
AMB Country Risk Report: Global Summary
Political Risk
Political risk is relatively high for the
Middle East and Northern Africa region
with all countries having at least a
moderate amount of political risk. Regional
stability is the largest challenge. Egypt,
Jordan, Morocco, Turkey and Lebanon all
have high levels of political risk. Figure 19
Political Risk Summary – Middle East and Northern
Africa
Score 1 (best) to 5 (worst)
C R T -1
C R T -2
C R T -3
C R T -4
C R T -5
M iddle E ast and N orthern A frica
International T ransactions P olicy
5
Legal S ystem
4
M onetary P olicy
3
2
1
R egional S tability
F iscal P olicy
0
S ocial S tability
B usiness E nvironm ent
G overnm ent S tability
Labor F lexibility
Source: A.M. Best
Financial System Risk
Figure 20 illustrates total premiums
as a percent of GDP. The average total
premiums as a percent of GDP are low in
the region, similar to the average for CRT5. Israel and Cyprus have the highest level
while Kuwait, Saudi Arabia and Egypt are
the lowest. Figure 20
Total Premiums/Gross Domestic Product
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
C R T -1
C R T -2
C R T -3
C R T -4
M iddle E ast and
N orthern A frica
Source: IMF World Economic Outlook, Swiss Re and A.M. Best
21
Copyright © 2009 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
C R T -5
Financial System Risk
Figure 20 illustrates total premiums as a percent of GDP. The average total premiums as
percent
of GDP are low in the region, similar to the average for CRT-5. Israel and
AMB Country Risk Report:aGlobal
Summary
Cyprus have the highest level while Kuwait, Saudi Arabia and Egypt are the lowest.
Figure 20: Total Premiums/Gross Domestic Product
North America
Source: IMF World Economic Outlook, Swiss Re and A.M. Best
North America
• The North America region is dominated by the United States of America which
accounts for USD 14 trillion of the total USD 16 trillion in economic activity.
•
The North America region is dominated by the United States of America which
accounts
forhousing
USD 14market,
trillion of
the total
16driving
trillionforce
in economic
activity.
• In 2007,
the US
which
had USD
been a
of the economy,
• Inits2007,
the USupsurge. Simultaneously,
housing market, which had
been amajor
driving
of the economy,
ceased
prolonged
several
USforce
commercial
banks,
ceased
its
prolonged
upsurge.
Simultaneously,
several
major
US
commercial
investment banks and mortgage companies suffered significant financial
loss, primarily
banks,
investment
bankshigh
and risk
mortgage
significant
financial
related
to subprime
or other
loans.companies
The ripplesuffered
effect spread
through
the US
loss,
primarily
related
to
subprime
or
other
high
risk
loans.
The
ripple
effect
financial system and developed into a global financial crisis. This financial turmoil led
througheconomies
the US financial
system and developed into a global financial
most spread
of the world’s
into recession. crisis. This financial turmoil led most of the world’s economies into recession.
Risk Category
Economic
Political
Financial System
Very Low
2
3
2 (3)
North America
Low
Moderate
0 (1)
1 (0)
0
0
1 (0)
0
High
0
0
0
16
22
Copyright © 2009 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
Very High
0
0
0
AMB Country Risk Report: Global Summary
Economic Risk
Figure 21
GDP Per Capita
Figure 21 illustrates the average wealth of
countries in the North America region. The
regional average for North America is an
average of the United States and Canada,
two countries with high levels of GDP per
capita. $70,000
$60,000
$50,000
USD
$40,000
$30,000
$20,000
$10,000
$0
C R T -1
N orth A m erica
C R T -2
C R T -3
C R T -4
C R T -5
C R T -4
C R T -5
Source: IMF World Economic Outlook
Figure 22
Gross Domestic Product (Billions, USD)
$9,000
$8,000
$7,000
$6,000
B illio n s, U S D
Figure 22 shows the average economic
size of countries in the North America
region (U.S. and Canada). The size of the
countries in this region far exceeds the
average size of any of the Country Risk
Tiers. The United States is by far the
largest country in the world in terms of
GDP and Canada is the 10th largest country
in our sample. $5,000
$4,000
$3,000
$2,000
$1,000
$0
N orth A m erica
C R T -1
C R T -2
C R T -3
Source: IMF World Economic Outlook
23
Copyright © 2009 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
AMB Country Risk Report: Global Summary
Political Risk
The region scores well in political risk. All
three countries – Bermuda, Canada and
the United States – have very low levels of
political risk. Figure 23
Political Risk Summary – North America
Score 1 (best) to 5 (worst)
International T ransactions P olicy
5
4
Legal S ystem
C R T -1
C R T -2
C R T -3
C R T -4
C R T -5
N orth A m erica
M onetary P olicy
3
2
1
R egional S tability
F iscal P olicy
0
S ocial S tability
B usiness E nvironm ent
G overnm ent S tability
Labor F lexibility
Source: A.M. Best
Financial System Risk
Figure 24 illustrates total premiums as
a percent of GDP. The regional average
(average of the U.S. and Canada) is on
par with the CRT-1 and CRT-2 average. The United States alone represents
approximately 30% of premiums written in
the world.
Figure 24
Total Premiums/Gross Domestic Product
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
C R T -1
C R T -2
N orth A m erica
C R T -3
C R T -4
Source: IMF World Economic Outlook, Swiss Re and A.M. Best
24
Copyright © 2009 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
C R T -5
AMB Country Risk Report: Global Summary
Sub-Saharan Africa
Sub-Saharan Africa
• The
region
of Sub-Saharan
Africa
contains
a vast
array
of climates,
natural
resources
• The
region
of Sub-Saharan
Africa
contains
a vast
array
of climates,
natural
and historical
foundations.
resourcesand
andcultural
historical
and cultural foundations.
•
The region as a whole is plagued with violence, crime, malnutrition and
• The region as a whole is plagued with violence, crime, malnutrition and corruption,
corruption, with few of the countries enjoying economic prosperity. In some
with few of the countries enjoying economic prosperity. In some cases, the region is
cases, the region is home to some of the most economically-challenged countries
home to some of the most economically-challenged countries in the world.
in the world.
•
The
insurance
regulatory
environments
through
most
Sub-Saharan
Africa
• The insurance
regulatory
environments
through
most
of of
Sub-Saharan
Africa
areare
in ain
of development,
working
compliance
with international
standards.
stage aofstage
development,
working
towardtoward
compliance
with international
standards.
Risk Category
Economic
Political
Financial System
Sub-Saharan Africa
Very Low
Low
Moderate
0
0
1
0
0
2
0
1
1
High
2
2
0
Very High
2
1
3
Economic Risk
Figure 25 illustrates the average wealth of countries in the region. Sub-Saharan Africa
includes some of the poorest countries that A.M. Best evaluates and the average GDP per
capita is below the average of a CRT-5 country. The wealthiest countries in the region
are South Africa and Mauritius while Ghana and Kenya are the poorest.
Figure 25: GDP Per Capita
Source: IMF World Economic Outlook
Figure 26 shows the average size of the economies in this region. As the graph shows
countries in this region are on average very small, similar to the average for a CRT-5
country. The largest countries are South Africa and Nigeria while Mauritius is the
smallest.
Figure 26: Gross Domestic Product (Billions, USD)
Source: IMF World Economic Outlook
18
25
Copyright © 2009 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
AMB Country Risk Report: Global Summary
Economic Risk
Figure 25
GDP Per Capita
Figure 25 illustrates the average wealth of
countries in the region. Sub-Saharan Africa
includes some of the poorest countries that
A.M. Best evaluates and the average GDP
per capita is below the average of a CRT-5
country. The wealthiest countries in the
region are South Africa and Mauritius while
Ghana and Kenya are the poorest. $70,000
$60,000
$50,000
USD
$40,000
$30,000
$20,000
$10,000
$0
C R T -1
C R T -2
C R T -3
C R T -4
C R T -5
S ub-S aharan A frica
Source: IMF World Economic Outlook
Figure 26 shows the average size of the
economies in this region. As the graph
shows countries in this region are on
average very small, similar to the average
for a CRT-5 country. The largest countries
are South Africa and Nigeria while
Mauritius is the smallest. Figure 26
Gross Domestic Product (Billions, USD)
$2,500
$2,000
B illio n s, U S D
$1,500
$1,000
$500
$0
C R T -1
C R T -2
C R T -3
C R T -4
S ub-S aharan A frica
Source: IMF World Economic Outlook
26
Copyright © 2009 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
C R T -5
AMB Country Risk Report: Global Summary
Political Risk
Figure 27 shows that the Sub-Saharan
Africa region scores relatively poorly in
terms of political risk (on average between
CRT-4 and CRT-5). The region performs
particularly poorly in terms of regional
stability. All countries have at least
moderate levels of political risk and the
political risk in Nigeria is very high.
Figure 27
Political Risk Summary – Sub-Saharan Africa
Score 1 (best) to 5 (worst)
C R T -1
C R T -2
C R T -3
C R T -4
C R T -5
S ub-S aharan A frica
International T ransactions P olicy
5
4
Legal S ystem
M onetary P olicy
3
2
1
R egional S tability
F iscal P olicy
0
S ocial S tability
B usiness E nvironm ent
G overnm ent S tability
Labor F lexibility
Source: A.M. Best
Financial System Risk
Figure 28 illustrates total premiums as a
percent of GDP. South Africa, which has
the highest premiums written in Africa,
distorts the average of this ratio in the
region. South Africa has a very high ratio
of premiums to GDP (over 15%) which
inflates the average that also contains the
very low ratios (less than 1%) in Ghana and
Nigeria. Thus, while the average for the
region appears high this can be misleading
in that it is not representative for the
majority of the countries in the region. All
of Africa comprises less than 2% of global
premiums.
Figure 28
Total Premiums/Gross Domestic Product
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
C R T -1
C R T -2
S ub-S aharan A frica
C R T -3
C R T -4
Source: IMF World Economic Outlook, Swiss Re and A.M. Best
27
Copyright © 2009 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
C R T -5
AMB Country Risk Report: Global Summary
Western Europe
• Western Europe is a highly developed and affluent region. The European Union
(EU) is an economic and political union of 27 countries that accounts for 30% of world
gross domestic product (GDP). The EU is facilitating a single European market with
standardized regulatory systems and free movement of people, goods, services and
capital. • The euro-zone is made up of the 16 EU members that have adopted the euro as their
currency. • Most, if not all, of Western Europe is experiencing a severe economic slowdown
and many countries are, or soon will be, in an official recession. While the European
Central Bank has cut interest rates to spur demand, economic growth in the region has
stagnated.
Risk Category
Economic
Political
Financial System
Very Low
9 (11)
15
15 (16)
Western Europe
Low
Moderate
9 (7)
1
4
0
4 (3)
0
High
0
0
0
Very High
0
0
0
Economic Risk
Figure 29 illustrates the average wealth of countries in the region. As the figure shows
the countries in Western Europe have very high levels of GDP per capita, on average
exceeding the CRT-1 average. While all the countries in this region have high levels of
wealth, Luxembourg and Norway are the wealthiest.
Figure 29: GDP Per Capita
Source: IMF World Economic Outlook
Figure 30 illustrates the average size of the economies in the region. On average the
countries of Western Europe are large; however there is a wide variance in size across the
region. The very large economies of Germany, France, United Kingdom, Spain and Italy
bring up the average significantly.
Figure 30: Gross Domestic Product (Billions, USD)
Source: IMF World Economic Outlook
Political Risk
28
While overall political risk scores in the region are low (15 of the 19 countries have very
low political risk while the other 4 have low political
risk), there is some weakness in
Copyright © 2009 by A.M. Best Company, Inc.
All rights reserved. No part of this
report mayof
be reproduced,
in a retrieval system
or transmitted
in any policy,
form or by any means;
electronic, mechanical,in
photocopying,
recording or
terms
laborstored
flexibility
and
fiscal
as illustrated
figure
31. otherwise.
AMB Country Risk Report: Global Summary
Economic Risk
Figure 29
GDP Per Capita
Figure 29 illustrates the average wealth
of countries in the region. As the figure
shows the countries in Western Europe
have very high levels of GDP per capita,
on average exceeding the CRT-1 average. While all the countries in this region have
high levels of wealth, Luxembourg and
Norway are the wealthiest.
$70,000
$60,000
$50,000
USD
$40,000
$30,000
$20,000
$10,000
$0
W estern E urope
C R T -1
C R T -2
C R T -3
C R T -4
C R T -5
C R T -4
C R T -5
Source: IMF World Economic Outlook
Figure 30 illustrates the average size of
the economies in the region. On average
the countries of Western Europe are
large; however there is a wide variance
in size across the region. The very large
economies of Germany, France, United
Kingdom, Spain and Italy bring up the
average significantly. Figure 30
Gross Domestic Product (Billions, USD)
$2,500
$2,000
B illio n s, U S D
$1,500
$1,000
$500
$0
C R T -1
W estern E urope
C R T -2
C R T -3
Source: IMF World Economic Outlook
29
Copyright © 2009 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
AMB Country Risk Report: Global Summary
Political Risk
While overall political risk scores in the
region are low (15 of the 19 countries have
very low political risk while the other
4 have low political risk), there is some
weakness in terms of labor flexibility and
fiscal policy, as illustrated in figure 31.
Figure 31
Political Risk Summary – Western Europe
Score 1 (best) to 5 (worst)
C R T -1
C R T -2
C R T -3
C R T -4
C R T -5
W estern E urope
International T ransactions P olicy
5
4
Legal S ystem
M onetary P olicy
3
2
1
R egional S tability
F iscal P olicy
0
S ocial S tability
B usiness E nvironm ent
G overnm ent S tability
Labor F lexibility
Source: A.M. Best
Financial System Risk
Figure 32 illustrates total premiums as a
percent of GDP. These markets are mature. Moreover, these countries are the base of
several of the world’s leading reinsurers. While nearly all the countries in the region
have relatively high ratios of premiums
to GDP, Luxembourg, the United Kingdom
and Ireland are among the highest while
Norway and Spain are among the lowest. Figure 32
Total Premiums/Gross Domestic Product
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
W estern E urope
C R T -1
C R T -2
C R T -3
C R T -4
Source: IMF World Economic Outlook, Swiss Re and A.M. Best
30
Copyright © 2009 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
C R T -5
AMB Country Risk Report: Global Summary
Conclusion
This report examined the current population of countries assigned Country Risk Tiers
by A.M. Best and identified the characteristics that are typical to countries in a given
tier (and region). Though the annual cycle for reviewing country risk ends in August,
at which time an updated tiers list will be released, all tier assignments are subject to
change at any time. More information is available at:
http://www3.ambest.com/ratings/cr/crisk.aspx?l=1&Menu=Country+Risk.
31
Copyright © 2009 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.