Moody's Investors Services is cautioning in a new report that even if insurers receive temporary government equity through the Treasury's Capital Purchase Program (CPP), it does not expect near-term upgrades of insurers who participate.
However, added Jeffrey Berg, a Moody's senior vice president and author of the report, "the addition of capital could mitigate some downward pressure on ratings depending on how it is deployed and whether capitalization was seen as a primary weakness for a particular insurer."
Mr. Berg explained that the reason no insurer would receive a ratings upgrade by Moody's even if it received aid under the CPP, which is a component of the Troubled Assets Relief Program (TARP), is because it is temporary and it would add to an insurer's financial leverage.
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