S&P Revision Does Not Impact Re/insurers
Standard & Poor’s Ratings Services in a report titled “The Recent Outlook Revision On Bermuda Does Not Affect Bermudian Re/insurers“, said that “despite the recent outlook revision on the sovereign credit rating on Bermuda to negative from stable, our counterparty credit and financial strength ratings on Bermuda-based re/insurance companies remain unchanged.”
S&P explained that it currently rates seven re/insurers in Bermuda in the ‘AA’ category. “In limited circumstances, we rate reinsurers higher than the local-currency sovereign credit rating according to our criteria. These circumstances include certain re/insurers that are domiciled in financial centres. We view Bermuda [AA-/Negative/A-1+] as a financial centre.”
S&P credit analyst Taoufik Gharib said: “Re/insurers that we may rate above the sovereign write most of their business with policyholders outside the financial centre, hold most of their investments in a form other than local sovereign debt of that financial centre, and hold most of their deposits and invested assets in financial institutions domiciled outside that financial center.”
The Bermudian re/insurers rated higher than the sovereign “are typically part of global re/insurance groups that conduct the majority of their business under a Bermuda license. We believe such (re)insurers’ financial strength is independent of the financial center’s sovereign risk,” S&P added.
S&P also noted that “Bermudian re/insurers showed their financial resilience in 2012, amid catastrophe losses, decreasing investment income, increasingly competitive pricing, a tepid economic recovery in the US, and the euro zone crisis. They generated strong results with a combined ratio of 91.7 percent and a return on average equity of 11.2 percent, compared with a weaker 104.1 percent and 1.0 percent, respectively, in 2011.”
The report is available to at www.globalcreditportal.com and at www.spcapitaliq.com
