S&P Global Ratings has published a new methodology for measuring the risk-based capital adequacy of re/insurers, noting that the new criteria could lead to credit rating actions on about 10% of ratings in the sector and affect capital and earnings assessments.
The proposed criteria would apply globally to all insurers in the life, P&C, health, mortgage, trade credit, and title insurance and reinsurance sectors.
They would also apply to assessing the asset-related risks of bond insurers.
S&P incorporated changes that improve ability to differentiate risk, enhance the global consistency of methodology, and improve the transparency and usability of its methodology.
Based on testing and assuming entities in scope of the criteria maintain their credit risk characteristics, the proposed criteria could lead to credit rating actions on about 10% of ratings in the insurance sector
S&P Global Ratings
S&P expect the proposals to have a more material impact on capital and earnings assessment, with changes in this key rating factor for up to 30% of insurers.
These score changes could affect up to 20% of stand-alone credit profiles. The lower potential impact on ratings compared with components of ratings reflects the application of the insurance ratings framework, group rating methodology, and sovereign rating constraints.
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