The updates primarily reflect a number of clarifications without any substantive changes made to the underlying criteria. These include the following:
--Updated commentary describing industry profile and operating environment for various market sectors;
--Additional details on the treatment of match-funded debt;
--Clarifications were added to the group rating methodology with respect to the definition of a Core company and the impact of 'fortune-sharing' reinsurance for noncore affiliates;
--Various updates to recognize the adoption of Solvency II;
--Addition of notching guidelines for Insurance Revenue Bonds based on their unique debt-servicing characteristics;
--Clarification of wording with respect to start-up insurer ratings constraints;
--Clarification that a hybrid issuance done on an intergroup basis is a form of complexity that can negate equity credit;
--A clearer, updated discussion on the weighting of credit factors.
In addition, Fitch revised the credit factor "Market Position and Size/Scale" to become "Business Profile", and moderately expanded its scope. This includes greater recognition of the riskiness of key lines of business and diversification.
While Fitch will implement its Business Profile criteria from this point forward in rating committee reviews, there will be a transitional period as Fitch migrates from the use of Market Position and Size/Scale phrasing to Business Profile in certain research reports. This can include company-specific research as well as special reports, in which the Market Position and Size/Scale phrasing may continue to appear.
As part of the criteria update, Fitch also announced the formal addition of the agency's Prism
The full master criteria report 'Insurance Rating Methodology' is available on the Fitch website at 'www.fitchratings.com' or by clicking on the link.
Fitch also recently published two model-related special reports including 'Prism
Additional information is available at 'www.fitchratings.com'.
Insurance Rating Methodology
Source: Fitch Ratings