S&P Tightens Criteria For Capital Adequacy

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April 13, 2010 Tuesday

210 words

S&P updates criteria for evaluating capital adequacy of insurers

Zaeem Shoaib

The updated criteria apply levels of stressed loss assumptions above the baseline insurance risk-based capital model for corporate bonds.

Standard & Poor's Ratings Services said April 12 that it updated its asset stress capital factor analysis for assessing the capital adequacy of insurance companies.

The updated criteria apply levels of stressed loss assumptions above the baseline insurance risk-based capital model for corporate bonds.

S&P credit analyst Kevin Ahern said the agency is incorporating more current information and new supplemental analytical tools to assess potential stress economic losses for all four asset classes.

The analysis will mainly have an impact on life insurance companies in the U.S., the agency said.

S&P said it will apply the updated criteria to other insurance sectors, such as P&C and health; however, it currently believes the ratings impact to be minimal.

The rating agency does not expect any rating changes for companies it believes can increase their retained earnings or raise capital to compensate for this incremental stress over the next two years, Ahern said.

"We do expect some of the outstanding ratings, specifically in the U.S. life insurance sector, to be affected," Ahern said. "However, we don't expect as many rating changes to result from this criteria update as in 2009, when we lowered our ratings on 28 groups of companies throughout the year."

April 19, 2010