S&P Assigns Allianz’ ART Its ‘AA’ FER Rating

Standard & Poor’s “assigned its double -’A’ financial enhancement rating (FER) to Zurich-based Allianz Risk Transfer (ART),” an Allianz AG subsidiary which specializes (naturally enough) in setting up alternative risk transfers as part of its commercial risk management operations.

“This is the first FEr issued to a European multilin insurance comapny,” said S&P. It explained that an FER “is an opinion of an insurer’s willingness and capacity to make timely payment in respect to insurance policies being used a financial guarantees on Standard & Poor’s rated transactions,” and said that Allianz and ART had both given representations that they understood and would respect the commitments inherent in financial guarantee transactions.

The S&P report based the FER rating on several factors, including ART’s strategic importance to the Allianz Group, its capital adequacy in excess of 150 percent and its experienced management team, which includes experts “in the insurance, reinsurance, investment banking, finance and actuarial fields.”

“Although ART is not considered a major player,” said S & P, ” it’s strong franchise reflects the company’s recognized expertise and acceptance as a source of quality capacity in the alternative risk transfer sector.” As a subsidiary of one of the world’s largest insurers it also benefit from instant brand name recognition and a high quality book of business.

S&P’s report also said it expected the alternative risk transfer market in general to continue to grow, “aided by hardening traditional insurance and reinsurance rates.”

ART is expected to profit from this market situation. “Non traditional business volume is expected to exhibit annual growth of about 30%, with modest growth in traditional business,” said the report.