S&P’s Assigns HIH America Insurance Co. Hawaii ‘R’ Rating

November 26, 2002

Standard & Poor’s Ratings Services said that it has assigned its ‘R’ financial strength rating to HIH America Insurance Co. of Hawaii Inc. (HIH Hawaii) because of the company’s insolvency and ongoing liquidation.

The State Insurance Commissioner of Hawaii officially declared HIH
Hawaii insolvent on May 30, 2002, which resulted in the transfer of all claims to the Hawaii Insurance Guaranty Assn.

HIH Hawaii was a workers’ compensation insurance company that provided coverage for companies in Hawaii. Although HIH Hawaii’s core insurance business was financially sound even at the time of insolvency, the company became overburdened by high-risk investments made by its sister companies and partners in California. Previously, Standard & Poor’s had assigned its ‘R’ financial strength rating to HIH Hawaii’s two sister companies, HIH America Compensation & Liability Insurance and Great States Insurance Co.

An insurer rated ‘R’ is under regulatory supervision owing to its financial condition. During the pendency of the regulatory supervision, the regulators may have the power to favor one class of obligations over others or pay some obligations and not others. The rating does not apply to insurers subject only to nonfinancial actions such as market conduct violations.

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