S&P Withdraws I.O. Re Ratings at Company Request

December 6, 2004

Standard & Poor’s Ratings Services announced that it has affirmed its ‘A’ counterparty credit and financial strength ratings on Inter-Ocean Reinsurance Co. Ltd. (IO Re) and subsequently withdrew its rating at the company’s request.

“We believe that IO Re’s business-risk profile has increased in recent years due to Standard & Poor’s ratings on IO Re’s shareholders (also insurance companies) being lowered in the past few years,” said the bulletin.

It explained that “IO Re provides coverage of property/casualty risks on a finite risk basis. The company’s business model is to arrange for the full reinsurance of the insurance risks that it writes. As a result, IO Re retains no net underwriting risk with respect to the business it writes but is compensated through a fee or margin with respect to each contract that it assumes, and, in certain cases, IO Re earns a profit commission on the results of ceded business.

“IO Re’s shareholders (i.e., retrocessionaires) assume the net underwriting risks; however, IO Re continues to be liable to its insureds and reinsureds should its reinsurers fail to meet their obligations.”

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