S&P Lowers QBE Hongkong Rating

May 15, 2006

As previously indicated (See IJ Website May 11), Standard & Poor’s Ratings Services has lowered its insurer financial strength rating on Hong Kong-based general insurer QBE Hongkong & Shanghai Insurance Ltd. (QBE Hongkong Shanghai) to “A” from “A+” following the withdrawal of the guarantee from Ireland-based reinsurer QBE Reinsurance (Europe) Ltd. (QBE Re Europe; A+/Stable/–).

S&P also said it has removed QBE Hongkong Shanghai’s rating from CreditWatch and assigned a stable outlook.

“The ‘A/Stable’ rating on QBE Hongkong Shanghai reflects the entity’s stand-alone financial strength, as well as the insurer’s strategic importance to Australia-based group QBE Insurance Group Ltd. (QBE group; core operating entities rated A+/Stable/–),” stated S&P credit analyst Paul Clarkson.

S&P also noted: “Despite the withdrawal, under the terms of the guarantee, holders of QBE Hongkong Shanghai policies issued before May 15, 2006, will continue to enjoy the benefit of the guarantee from QBE Re Europe. QBE group has indicated that the withdrawal of the guarantee is consistent with current regulatory practice globally to remove cross guarantees between licensed insurance subsidiaries.

“The stable outlooks on QBE group and its core subsidiaries are underpinned by the expectation that the group’s strong operating profitability and adequate capitalization will be maintained commensurate with the existing ratings level.”

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