“I'm a 'triple-A' locked in an 'A-minus' body. It's veryfrustrating.” That's how Donald Kramer, chief executive officer ofAriel Re, began his answer to a question about rating agencyactivity during a session of the World Insurance Forum in Bermudalast month.
The context of the statement and the follow-up discussion to theremark invite us to reexamine how we use ratings in this industry,and why cuts to certain acceptable ratings levels are death knellsfor property-casualty insurance businesses, prompting them tounravel into runoff and sales.
With his comment, Mr. Kramer was referring to the fact thatstart-ups such as his firm cannot garner ratings higher than“A-minus” from rating agencies. The remark preceded his answer to aquestion about whether rating agencies have overreacted to twoyears of storms with changes to catastrophe-related capital chargesin their rating formulas.
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