The underwriting entities which make up Australia’s QBE Group became the first insurers to be downgraded by Standard & Poor’s following its assessment of the group’s exposure to the World Trade Center disaster. The international rating agency announced today that all ratings were lowered from single-‘A’ plus to single-‘A’ minus and that it had put them on CreditWatch with negative implications.
S&P said yesterday that the ratings of many insurers were likely to be lowered as a result of the disaster. (See related article in today’s National News). Even though QBE has announced no loss figures, S&P took action on the group’s underwriting entities (the Group itself is not rated) as a result of its exposures through the Lloyd’s market and from p/c coverage written by its European and U.S. divisions. It noted that it expected QBE to be “the only Australian insurance group with material underwriting exposure to the disaster.”
The ratings were lowered after QBE revealed that, contrary to its initial statement that it was “substantially protected,” its coverage probably wasn’t enough to fully protect its underwriters from losses. (See IJ Website Sept.18). S&P said, however, that despite the expected losses, the group continues to meet new regulatory standards, maintains strong prudential margins, and has protections in place to limit exposure to a downturn in equity markets.
QBE is also being watched closely by the Australian Prudential Regulation Authority in connection with its loss exposures following the U.S. disasters. Meanwhile its shares continue to fall on the Australian stock market; its equity capital has been halved to U.S.$1.18 billion in the last week.
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