Life rarely unfolds in a straight line. History shows that periods of stability are often interrupted by events that arrive suddenly, spread rapidly, and test the resilience of financial systems. Geopolitical shocks, market dislocations, and financial innovation can interact in unexpected ways, creating risks in parts of the economy that may have appeared benign only months earlier. At Assuris, preparation for the unknown is not an abstract concept – it is a core responsibility.
Assuris exists to protect Canadian life and health insurance policyholders, regardless of where shocks originate or how they propagate. Fulfilling this mandate requires constant vigilance and forward‑looking analysis. The Industry Risk Analysis work undertaken at Assuris is designed to ensure the organization maintains the highest possible level of preparedness, particularly during periods of elevated uncertainty such as the one we are facing today.
At present, two macro‑financial risks stand out for their potential to negatively affect the broader economic landscape and, indirectly, the financial ecosystem in which insurers operate: stress in private credit markets and the possibility of a material oil shock.
Stress in Private Credit Markets: A Liquidity Challenge
Private credit has grown rapidly in the life and health insurance space over the past decade1, becoming a core source of financing for companies as banks retreated from certain types of lending. While this growth has brought diversification and yield opportunities, it has also introduced new vulnerabilities—particularly around liquidity.
Recent developments have highlighted those vulnerabilities. Alternative asset managers have come under pressure following significant fund withdrawals and broader scrutiny of private markets. When investors seek liquidity from funds holding inherently illiquid assets, tensions can emerge quickly. These dynamics have placed renewed focus on asset–liability mismatches and valuation resilience within private market structures2.
While these stresses are currently centered on private markets, they have the potential to spill over into the broader financial system through confidence effects, valuation adjustments, and interconnected funding channels. This is an area Assuris is monitoring closely as part of its ongoing risk surveillance.
Oil Shock Risk: Inflation and Growth at Risk
The global economy also faces a renewed risk of an oil shock, closely linked to geopolitical tensions in the Middle East. Disruptions and heightened uncertainty in the oil market have pushed prices higher. In response, authorities have released significant quantities from strategic oil reserves to limit price increases3. While these measures can help smooth short‑term volatility, they are temporary by design.
Sustained increases in oil prices would carry important macroeconomic consequences, including:
- Renewed inflationary pressure, particularly for energy‑sensitive goods and services
- Higher interest rate expectations, as central banks respond to inflation risks
- Slower global growth, as rising input costs weigh on consumption and investment
Markets are currently assessing the likely duration of the oil shock4. While baseline assumptions may still reflect a short‑lived event, history suggests conditions can change quickly. The dominant concern today is no longer whether geopolitical tensions can cause an oil shock, but how severe and persistent such a shock might become.
Physical supply disruptions are already material, and even in their absence, perceived risk alone can drive price spikes. Policy interventions—such as reserve releases or maritime security measures—can soften the impact, but they cannot eliminate it entirely.
Assuris’ Role: Prepared for the Unknown
Assuris cannot predict the exact form the next crisis will take. What it can do—and does consistently—is prepare for scenarios that stress liquidity, valuations, confidence, and interconnected markets. The Industry Risk Analysis work at Assuris focuses on identifying emerging risks early, understanding potential transmission channels, and ensuring that policyholder protection remains robust even under severe conditions.
Periods of crisis are often accompanied by sharp movements in interest rates, widening credit spreads, and volatility in asset values. While private credit market stress and oil‑driven inflation risks may originate from different sources, they share a common feature: they test resilience precisely when confidence erodes. These are the moments when life and health insurers with strong asset‑liability management practices demonstrate their strength.
Evaluating the soundness of insurers’ risk management practices lies at the heart of Assuris’ preparedness framework.
Today’s world is inherently uncertain. Assuris stands ready to respond—ensuring Canadian life and health insurance policyholders are protected when it matters most.
1 US life insurers head offshore as private credit upends industry (opens in new tab)
Life Insurers’ Private Credit Investments and Annuity Market Share Capture (PDF) (opens in new tab)
2 After pouring billions into private credit, many investors want out (opens in new tab)
Fitch Ratings: Life Insurers Tied to Alt IMs See Higher Private Credit Exposure, Risk (opens in new tab)
3 The biggest release of emergency oil stockpiles in history was announced (opens in new tab)
4 The potential impact of high oil prices on economies | Vanguard (opens in new tab)
