This regular publication gives our perspective on key recent activity by the main rating agencies used in the reinsurance, specialty and large commercial lines sectors.

If you are interested in a similar publication for other sectors, please contact us at

Latest Issue

Welcome to the 11th Edition of the LRR.

Litmus Ratings Review April 2015

Reinsurer M&A and how expected performance drives reinsurer ratings

It was beginning to look like the rating agencies were crying wolf with their negative outlooks on the reinsurance sector. Robust capitalisation and, actually, results that were not that bad, had supported individual credit profiles despite the ongoing soft market, largely leading to rating affirmations through 2014.

But the flurry of M&A activity (in part a function of the soft market) has now led to various applications of ‘CreditWatch’….

The LRR includes our unique ‘Litmus Composite Score’ (an average of A.M. Best and S&P ratings), plus underlying details on the individual agency rating grades, on over 40 of the main carriers for these sectors (click below for the latest table and the table archives).


Divergent views on Ren Re’s acquisition of Platinum

“A common complaint about the world of ratings is a lack of competition; though that is hardly the fault of the established agencies themselves. But it begs the question as to what a desire for greater competition actually means?”

READ MORE: Litmus Ratings Review December 2014

Measuring Operating Performance; why neither RoEs or Combined Ratios fully cut it

“The juxtaposition between capital adequacy and operating performance in ratings is often not well understood. Simply put though, future operating performance (and the things seen as driving it; such as strategy, industry risk, management quality, market position, ERM etc.) are viewed by the agencies as key drivers of the future balance sheet and hence of future financial strength…”

READ MORE: Litmus Ratings Review November 2014

Deconstructing S&P’s Lloyd’s market rating and the path to ‘AA-‘

“S&P was the first of the three agencies that rate the market to move it’s ‘A+’ rating to a ‘positive’ outlook back in August 2012. Typically the agency would expect to resolve an outlook (i.e. to decide whether to make the implied rating change or affirm the existing rating and restore the outlook to ‘stable’) within a 12 to 24 month time frame (so we are 23 months into the period). However it’s not a hard and fast rule and there is also some sense that S&P ‘re-booted’ this at the same point it reassessed Lloyd’s rating following the launch of the new rating criteria (May 2013)…”

READ MORE: Litmus Ratings Review July 2014

What’s in an outlook?

“We often stress that the general weakness in the re/insurance market’s use of ratings is a tendency to ignore rating outlooks. Indeed a central part of the Litmus Composite Score (LCS) concept is the incorporation of the outlook as well as the ratings themselves in our LCS calculation…”

READ MORE: Litmus Ratings Review May 2014

Whither ‘unsolicited’ ratings and rating agency competition

“When some of us at Litmus were cutting our rating agency teeth there were a few things more likely to light the blue touch paper in conversation with insurance market participants than ‘unsolicited ratings’ (ratings produced without the rated entity’s request)…”

READ MORE: Litmus Ratings Review March 2014

Reinsurer downgrade risk in a soft marker: and so it begins

“A decade or so ago nobody in the reinsurance industry would have regarded a downgrade as a surprise. While these were invariably controversial, the cumulative impact of WTC, the dot-com crash, the emerging recognition of the profound mispricing of late 90’s US casualty business and the re-emergence of adverse development in legacy A&E reserves created an environment where even some of the strongest industry players were facing reduced ratings (and several high profile firms ceased to exist)…”

READ MORE: Litmus Ratings Review February 2014

The ‘triple whammy’ impact of reserve hikes on ratings

“Earlier this year both the Tower Group and Meadowbrook felt the impact of prior year adverse development on their balance sheets and ratings. QBE and RSA have now joined them…”

READ MORE: Litmus Ratings Review December 2013

Comparing Best and S&P ratings for reinsurance & speciality lines groups – It’s a question of capital 

“It’s a question of capital; or rather, it’s a question of the relative importance given to capital in the overall analysis. Firstly we should note that the average difference in rating outcomes is small. For the L-Zebedee cohort A.M. Best’s mean rating is ‘a+’ among those rated by both it and S&P where’s A&P’s mean rating is just one notch below at ‘A’…”

READ MORE: Litmus Ratings Review November 2013

Our perspective on recent activity in the sector by the agencies

“Other than for those carriers highly impacted by sovereign ratings, ratings activity is still benign. The agencies concerned about the impact of ‘third party capital’ but not yet to the extent that the degree of competition/pricing pressure is seen as having a materially negative impact on the credit profiles of traditional carriers…”

READ MORE: Litmus Ratings Review October 2013

Our perspective on recent activity in the sector by the agencies

“The ratings agencies traditionally have something of a reinsurance sector publishing blitz in the run-up to Monte Carlo. Conventional industry wisdom has it that this includes a tendency to ‘organise’ downgrades to coincide with the event (presumed to be an attempt to gain media attention)…”

READ MORE: Litmus Ratings Review September 2013