Standard & Poor’s has placed its ‘A’ insurer financial strength and counterparty credit ratings on ACE Insurance Ltd. on CreditWatch with negative implications as a result of similar action taken on parent ACE Ltd. This action follows the placement of CreditWatch negative on the counterparty credit and financial strength ratings on various members of the ACE group.
ACE Insurance Ltd. is the Australian arm of the Bermuda-based insurance company ACE Ltd., with its ratings benefiting from its strategic importance to the ACE group. “Any rating change to ACE Insurance is more likely to reflect a rating movement for the parent than stand-alone issues,” Craig Bennett, associate director, Financial Services Ratings, said. Standard & Poor’s is in the process of reviewing the overall operations of the group and will continue to separately monitor each operating entity’s financial strength, capital adequacy, and ability to reduce exposure to prospective adverse loss development and credit risk.
The outlook change reflects an announcement by ACE Ltd. that it is planning to strengthen its asbestos reserves by US$2.18 billion (gross) (US$516 million net; US$354 million after tax), which will have repercussions throughout the organization.
The CreditWatch action also reflects Standard & Poor’s concerns regarding the group’s capital adequacy, accumulated credit risk to reinsurance recoverables, and the managed run-off of historical liabilities associated with the old CIGNA books of business.
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