Why Solvency II won’t replace the market use of ratings

Why Solvency II won't replace the market use of ratings

Although effectively communicating the output is likely to be critical for European re/insurers Periodically we hear the comment that the required publication by EU domiciled re/insurers of details on their financial health under Solvency II (SII) may remove market demand to see re/insurer ratings. Here at Litmus, we seriously doubt that. Fundamentally the information that will be disclosed under SII will have to be interpreted by the user in order

Read more

Litmus comments on Fitch’s suggestion that an A- from A.M. Best equates to only a BBB from other agencies

Litmus comments on Fitch's suggestion that an A- from A.M. Best equates to only a BBB from other agencies

Recently Fitch Ratings (Fitch) released a paper arguing that rating users and regulators should treat an “A-“ A.M. Best (Best) Financial Strength Rating (FSR) as equivalent to a “BBB” Fitch Insurer Financial Strength (IFS) rating, and to the “BBB” ratings of the other main Credit Rating Agencies (CRA’s)

Read more

Upgrades and downgrades are inevitable with A.M. Best’s new rating approach

Upgrades and downgrades are inevitable with A.M. Best's new rating approach

Upgrades and downgrades are inevitable with A.M. Best’s new rating approach A.M. Best is currently in a ‘Request for Comment’ (“RFC”) period for proposed changes to its rating methodology. It is also just finalising an update to one crucial part of that, namely the capital model it

Read more

Follow My Leader

Follow My Leader

A message for the rating agencies One of the key elements of the rating process is ‘competitive position’, which for reinsurers refers to their ability to attract and retain business in a tough market place.  The rating agencies understandably tend to believe that ‘pricing power’ is vital

Read more

The assumptions that can hurt you

The assumptions that can hurt you

Those in the insurance sector live or die by their appreciation and calibration of the risks they cover for various types of customers and counterparties.  But many don’t have the data that enables them to properly manage one of their own biggest risks – the sustainability of

Read more

‘The end of the life of pi’ (the demise of unsolicited ratings)

'The end of the life of pi' (the demise of unsolicited ratings)

One of the most controversial aspects of rating agency activity seems to be dying a slow but inevitable death. On Tuesday S&P announced the withdrawal of almost all its entire North American and EMEA ‘pi’ (public information based) insurance ratings.  This amounted to 38 ratings withdrawals in

Read more

The Heat is On

The Heat is On

S&P’s forecast for Lloyd’s results; the first explicit sign of a much more bearish view of sector earnings. Since January the rating agencies have become increasingly negative on their outlook for ratings in  the  reinsurance sector overall, while in practice affirming or even increasing individual reinsurer* ratings.

Read more

Mutual Appreciation – a rating agency conundrum

Mutual Appreciation - a rating agency conundrum

It’s easy to speculate that the rating agencies might not give a Mutual (or cooperative) insurer the credit they deserve in the rating process; that an agency may appear more familiar or comfortable with listed shareholder (stock) companies and that a shareholder company capital structure and profit

Read more

Why is the current pricing pain not yet impacting reinsurer ratings?

Why is the current pricing pain not yet impacting reinsurer ratings?

Since the disappointing pricing at the 1.1. renewal the bad news on reinsurance pricing has kept on coming. April, June and July renewals were all reported as materially down by the major brokers. S&P adopted a ‘negative trend’ in its reinsurer ratings in direct response to the

Read more

Will ratings hinder reinsurer M&A and the hedge fund ‘play’?

Will ratings hinder reinsurer M&A and the hedge fund ‘play’?

In the investment banker ‘101’ playbook for cyclical industries the reinsurance industry has arrived at the page marked ‘weak pricing due to too much competition; sell M&A services to our clients’. This, if you are a banker, can be a very nice place to be.  Less so

Read more