S&P Publishes Industry Report Card on Reinsurers

August 11, 2003

Standard & Poor’s has published an industry report card on North American reinsurers.

Continued rate increases in the global reinsurance market have failed to stem the downward pressure on ratings, and Standard & Poor’s outlook on the reinsurance sector remains negative for the sixth successive year.

“Despite further price increases in the January 2003 renewal season, the market continues to suffer from diminished quality of capital, reduced financial flexibility, prior-year liabilities, the overhang of reinsurance recoverables, and the likelihood that many companies’ operating performance will fall short of expectations,” noted Standard & Poor’s credit analyst Laline Carvalho.

To compound the pressure on ratings, reinsurers have reportedly had a difficult time capitalizing on the hard market conditions of recent years. Although participants need to rebuild and restructure their capital bases and put in place foundations to reduce future loss volatility, the ease of entry for new players and increased competition in the market have dampened the ability of existing players to recover.

The report card can be found on RatingsDirect, Standard & Poor’s Web-based credit analysis system, at www.ratingsdirect.com. The commentary can also be found on Standard & Poor’s Web site at www.standardandpoors.com. Click Credit Ratings and find the article under “Commentary & News.”

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