A criteria article published Tuesday details how Standard & Poor’s has revised its definition of insurer financial strength ratings to explicitly incorporate the potential for direct sovereign risk.
Previously the risk of the potential for direct government intervention, demonstrated primarily through mandated changes in
contractual terms of insurance obligations in response to economic crisis, had been excluded from rating definitions and ratings.
“The change results in lower ratings on some foreign branches and
guaranteed subsidiaries, especially for those domiciled in higher-risk
environments in which systemic risks or severe economic stress-the
predecessors to government intervention-are perceived to be greatest,” Standard & Poor’s credit analyst Mark Puccia said. “The change also makes the definition of analytic methodologies for insurance financial strength ratings conform with those used for issuer ratings in the bank and corporate sectors.”
The commentary article, which is titled “Criteria Update: Factoring
Country Risk Into Insurer Financial Strength Ratings” can be found on
RatingsDirect, Standard & Poor’s Web-based credit analysis system. The article can also be found on Standard & Poor’s Web site at standardandpoors.com. Select Fixed Income then Insurance then Ratings Criteria.
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