A spate of dividend suspensions by insurers in response to the COVID-19 pandemic will not hurt their credit quality or ratings, S&P says.

The ratings agency is actively engaging with insurers to understand the implications of COVID-19 on their capital positions as regulators in Australia and Europe advise prudence when setting capital distributions – especially any actions that could materially affect insurers’ capital or liquidity positions.

While S&P believes measures adopted to contain COVID-19 have pushed the global economy into recession, analyst Dennis Sugrue says the decision by insurers to curb or suspend dividends, bonuses, and other discretionary capital distributions “doesn't always indicate constrained capital or cash”.

"We believe it points to the uncertainty regarding the COVID-19 pandemic and the hefty costs that could materialise as a result.”

The agency says its economic and credit implication assessments are based on an assumption the pandemic will peak about mid-year.

“We do not consider the recent wave of insurers electing to skip upcoming dividend payments as a sign of systemic capital weakness across the industry and do not consider this a trigger for rating actions,” S&P says.