A.M. Best Takes Various Rating Actions Resulting from Impact of Hurricane Katrina.OLDWICK, N.J. -- Due to the evolving effects of Hurricane Katrina  Editing of this page by unregistered or newly registered users is currently disabled due to vandalism. , A.M. Best Co. has been aggregating public and private information in order to assess the financial impact it will have on insurers. A.M. Best expects all rated companies will be able to meet their current loss obligations despite the projected magnitude of the potential insured losses. However, the insured losses from Hurricane Katrina have had a significant impact on some insurers, leaving potential capital shortfalls relative to their current rating level and also calling into question the risk management capabilities of some insurers. The determination of the potential impact of Hurricane Katrina and A.M. Best's subsequent analysis of catastrophe Catastrophe, from the Greek Καταστροφή (katastrephein), literally means "to turn" (strephein) "downwards" (kata-). risk management will take some time, and additional rating actions are likely in the future. However, based on the information known to A.M. Best at this time, the following rating actions have been taken: Olympus Re The financial strength rating (FSR (Free System Resource) In Windows 3.x, the amount of unused memory in various 64K blocks reserved for managing current applications. Every open window takes some space in this area. See Windows memory limitation. ) has been downgraded to B+ (Very Good) from A- (Excellent), the issuer credit rating (ICR (Intelligent Character Recognition or Image Character Recognition) The machine recognition of hand-printed characters as well as machine printing that is difficult to recognize. ) has been downgraded to "bbb-" from "a-" and both have been placed under review with negative implications. Allmerica Financial Property & Casualty Companies The FSR of A- (Excellent), the ICR of "a-" and the debt ratings have been placed under review with negative implications. Balboa Balboa, town (1990 pop. 2,751), Colón prov., in the former Panama Canal Zone, on the Gulf of Panama. The port for Panama City, Balboa was the administrative headquarters of the Panama Canal Zone. It was also the site of a U.S. navy base (closed 1999). Insurance Group The FSR of A (Excellent) and the ICR of "a" have been placed under review with negative implications. DaVinci Re The FSR of A (Excellent) and the ICR of "a+" have been placed under review with negative implications. Endurance Endurance See also Longevity. Atalanta feminine name denotes power of endurance. [Gk. Myth.: Jobes, 148] Boston marathon famous 26-mile race held annually for long-distance runners. [Am. Pop. Culture: Misc. Specialty The FSR of A (Excellent), the ICR of "a" and all debt securities have been placed under review with negative implications. Florists Mutual Group The FSR of A- (Excellent) has been placed under review with negative implications. Imagine Insurance Company Ltd The FSR of A- (Excellent) and the ICR of "a-" have been placed under review with negative implications. IPCRe The FSR of A+ (Superior) and the ICR of "aa-" have been placed under review with negative implications. Louisiana Farm Bureau Mutual Insurance Company The FSR of A- (Excellent) has been placed under review with negative implications. Mississippi Farm Bureau Mutual Insurance Company The FSR of A+ (Superior) has been placed under review with negative implications. Montpelier Re The FSR of A (Excellent), the ICR of "a" and all debt securities have been placed under review with negative implications. Mutual Savings Fire Insurance Company Mutual Savings Life Mutual Savings Life provides life insurance products, annuities, and other insurance products to individuals and businesses. Founded in 1927 in Decatur, Alabama, Mutual Savings is 100% owned by Primesco, a company founded for the purpose of acquiring Mutual Savings. Insurance Company The FSR of B- (Fair) has been placed under review with negative implications. Odyssey Odyssey (ŏd`ĭsē): see Homer. Odyssey Homer’s long, narrative poem centered on Odysseus. [Gk. Lit.: Odyssey] See : Epic Odyssey Re The FSR of A (Excellent), the ICR of "a" and all debt securities have been placed under review with negative implications. PartnerRe Group The FSR of A+ (Superior), the ICR of "aa-" and all debt securities have been placed under review with negative implications. PXRE The FSR of A (Excellent), the ICR of "a" and all debt securities have been placed under review with negative implications. XL Capital XL Life Insurance and Annuity annuity: see insurance. annuity Payment made at a fixed interval. A common example is the payment received by retirees from their pension plan. There are two main classes of annuities: annuities certain and contingent annuities. XL Life Ltd (Bermuda) The FSR of A+ (Superior), the ICR of "aa-" and all debt securities have been placed under review with negative implications. The following companies previously had already been under review for reasons other than losses relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc Hurricane Katrina. Due to the magnitude of losses caused by this recent hurricane, the scope of A.M. Best's review is now extended to include an evaluation of the impact relating to Hurricane Katrina. Alea Group The FSR of A- (Excellent) and the ICR of "a-" remain under review with negative implications. American Re The FSR of A (Excellent) and the ICR of "a" remain under review with negative implications. Munich Reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. The FSR of A+ (Superior), the ICR of "aa" and all debt ratings remain under review with negative implications. Transatlantic Re The FSR of A+ (Superior) and the ICR of "aa-" remain under review with negative implications. Additional Rating Commentary State Farm Group Due to its significant market share within the affected region, the financial strength of State Farm has drawn a great deal of interest. A.M. Best has reviewed the ability of State Farm to absorb varying levels of loss. A.M. Best is comfortable that State Farm can withstand substantial losses from Katrina and still maintain capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. supportive of its FSR of A++ (Superior). Accordingly, A.M. Best has affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. the rating of State Farm Mutual Automobile Insurance Company and its reinsured affiliate. The rating of A+ (Superior) of State Farm Fire & Casualty has not been affirmed at this time due to the potential impact of the losses on this specific subsidiary and the possible need for capital support from its parent. Lloyd's of London Not to be confused with Lloyds Bank or Lloyd's Register. Lloyd's of London is a British insurance market. It serves as a meeting place where multiple financial backers or “members”, whether individuals (traditionally known as With regard to Lloyd's of London, while Lloyd's is expected to take a significant share of the industry's loss from Katrina, the current loss impact to the organization is not outside A.M. Best's expectations. Accordingly, A.M. Best believes that Lloyd's overall capitalization position post-Katrina remains supportive of its current FSR of A (Excellent) and ICR of "a", which remain unchanged at this time. However, A.M. Best recognizes that it is still early and estimates are subject to change. A.M. Best is continuing to gather information regarding recoverables, collateral and liquidity. Further Commentary A.M. Best is continuing to gather information on all primary insurance and reinsurance companies with losses stemming from Katrina, and may take further rating actions in the future. A.M. Best has reviewed the potential loss exposure for those insurance organizations with the largest loss exposure relative to their capital. Given the magnitude of the loss and the difficulty of assessing the potential losses from Katrina, some companies have not yet been able to provide their estimated loss exposure, and many loss estimates may change once the uncertainties of loss coverage are clarified. A.M. Best has accounted for a potential increase in losses within its initial review of companies. Those companies yet to provide estimates are expected to provide some basis for their potential loss within the next week. As greater certainty of losses is provided, there are likely to be other rating actions related to this event. As part of A.M. Best's analysis, each company is evaluated based on its ability to withstand the impact from a major catastrophic event. Further, those companies with significant gross catastrophe exposure are tested for their ability to absorb additional catastrophe losses. While the level of a company's risk-adjusted capital is a significant rating factor for the current rating action, a company's demonstrated risk management capability is also an important rating consideration. Therefore, during the under review period, A.M. Best will not only be assessing the reasonableness of each company's recapitalization Recapitalization Restructuring a company's debt and equity mixture often with the aim of making a company's capital structure more stable. Notes: Companies often want to diversify their debt-to-equity ratio to improve liquidity. plan (whether from earnings or a capital raise) but will also be reevaluating each company's risk management capability and controls. Therefore, the replenishment replenishment the addition of an appropriate quantity of properly prepared solution containing the correct concentration of chemicals to the developer solutions used in radiography. of capital alone may not be sufficient to sustain a company's previous rating. Although it is expected that the magnitude of this specific loss event will help to highlight the significant risk an insurer An individual or company who, through a contractual agreement, undertakes to compensate specified losses, liability, or damages incurred by another individual. An insurer is frequently an insurance company and is also known as an underwriter. can face from catastrophic events--and Hurricane Katrina is expected to result in more conservative underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. and pricing in the market--it is still too early to gauge the extent of this future impact. Further, should the long-term ramifications ramifications npl → Auswirkungen pl of this loss event be a long-term positive for pricing, individual companies may require additional capital resources to fully participate in the reemergence of a hardening hardening, in metallurgy, treatment of metals to increase their resistance to penetration. A metal is harder when it has small grains, which result when the metal is cooled rapidly. market. Hurricane Katrina is proving to be the most costly catastrophe in U.S. history. A.M. Best has accumulated ac·cu·mu·late v. ac·cu·mu·lat·ed, ac·cu·mu·lat·ing, ac·cu·mu·lates v.tr. To gather or pile up; amass. See Synonyms at gather. v.intr. To mount up; increase. the losses from communications from rated insurers and utilized its own estimates where information is not yet available. To date, announced and estimated losses for individual companies total just over $30 billion, but the assumptions behind the estimates from companies vary widely. A significant unknown at this point is how much of the resulting insured loss will stem from flood damage and the amount of coverage provided for a large amount of loss that may be subject to dispute. Accordingly, the range of possible ultimate insured losses from Hurricane Katrina is very significant and will not be known for some time. Specifically, there will likely be both political and marketing pressure on primary insurance companies to cover property losses under windstorm wind·storm n. A storm with high winds or violent gusts but little or no rain. windstorm A storm with high winds or violent gusts but little or no rain. coverage, even though the damage may more likely have resulted from flood damage. If primary companies are required to extend coverage for these losses, a significant share will likely be borne by reinsurers who will likely "follow the fortunes" of primary companies having exceeded their underlying retention. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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