S&P Lowers Gerling Global Re’s Ratings to ‘BBB’

September 5, 2002

Standard & Poor’s announced that it has lowered its long-term counterparty credit and insurer financial strength ratings on Germany’s Gerling-Konzern Globale Ruckversicherungs-AG (GKG), the reinsurance arm of the Gerling Group, and its long-term insurer financial strength rating on related entities to triple-‘B’ from single-‘A’-minus.

S&P said it was taking the action following “GKG’s announcement that it is engaged in discussions with France-based reinsurer SCOR.” (See IJ Website Sept.4) It also noted that it had put SCOR and its Subsidiaries “on CreditWatch Negative” following the announcement that GKG intended to dispose of all of its life reinsurance businesses and the majority of its third-party non-life reinsurance activities.

“The downgrade and CreditWatch placement reflect the possibility that, following the completion of any transaction with SCOR, some of the legal entities comprising the GKG group will be placed into run-off,” said S&P’s bulletin It added that “Should the transaction not complete, the ratings are likely to be in the triple-‘B’ range, reflecting ongoing concerns about GKG’s existing capitalization,” it stressed, however that “this action does not reflect any deterioration in the portfolio currently underwritten by GKG.”

Commenting on the rating agency’s actions analyst Karin Clemens indicated that, “The rating actions reflect the likely status of the legal entities that comprise the GKG group should the transaction with SCOR be completed.” She added that “For policyholders included in the transaction, the transfer of the business to SCOR would be positive in terms of the financial strength of the new reinsurer, although this will depend on the terms of the transaction.”

Clemens stated that “Standard & Poor’s would normally not rate any entity that faces the prospect of being placed into orderly, well-capitalized run-off higher than triple-‘B’.”

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