S&P Reports on Increased Cat Loss Potential, Modeling

June 28, 2005

Standard & Poor’s Ratings Services has issued a new report – “Reinsurance Criteria: Larger Losses And Better Modeling Prompt Changes To Property Catastrophe Criteria-” that examines the upsurge in Cat Losses.

S&P notes that “since the early 1990s, catastrophic loss activity and the insurance industry’s potential for losses have increased in certain geographic areas.” But the industry hasn’t been caught napping. S&P points out that “at the same time, modeling firms and the leading reinsurance companies have improved their modeling and technology capabilities, resulting in significant improvements and more advanced techniques for assessing catastrophe risk.”

“In recognition of these changes, we have enhanced and updated our property catastrophe insurer criteria,” stated S&P credit analyst Damien Magarelli. The rating agency said it realized that “catastrophic loss activity can have a significant impact on a company’s overall financial strength. The revised criteria acknowledge that the most effective source of property catastrophe modeling data is that which is provided by the reinsurers themselves. Therefore, the approach adopted is to use mainly a reinsurer’s own modeled output and verify consistency by obtaining additional relevant data.”

The report is available to subscribers of RatingsDirect, S&P’s Web-based credit research and analysis system, at www.ratingsdirect.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-9823 or sending an e-mail to research_request@standardandpoors.com.
Ratings information can also be found on Standard & Poor’s public Web site at: www.standardandpoors.com; under Credit Ratings in the left navigation bar, select Find a Rating, then Credit Ratings Search. All Standard & Poor’s research information is accessible for 24 hours after publication on the public Web site.

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