S&P Adds Reinsurance Analysis Criteria

S&P Adds Reinsurance Analysis Criteria

NU Online News Service, April 20, 12:15 p.m. EDT?Standard & Poor's announced it has enhanced its criteria for evaluating loss reserves of global reinsurance groups and some non-U.S. insurance groups that underwrite casualty business and will ask them to supply more data.[@@]

The New York-based ratings agency said analyzing loss reserves is often the most challenging part of evaluating an insurer's current balance-sheet strength.

Loss reserving for property-casualty reinsurance and insurance groups has had a "checkered recent history," especially those involved in the U.S. casualty business, the ratings firm said.

Over the past three years, S&P observed, many groups had to correct for past underestimations of loss reserves, which has simultaneously lowered the U.S. insurance industry's pretax earnings and capital by more than $35 billion in the last three-year period.

S&P's new criteria will be applied to the following groups:

? All reinsurance groups (including those filing annual statements in the United States, since S&P says it considers the "Schedule P" disclosures in those statements to be inadequate for reinsurers).

? All subsidiary companies of groups writing a material proportion of third-party reinsurance business.

? All non-U.S. primary insurance companies writing a material proportion of casualty business.

? All reinsurers and insurers where credit is given for surplus reserve adequacy in S&P's capital adequacy model.

S&P said that each of these groups and companies will be asked by S&P to complete a loss-reserving spreadsheet model for individual casualty classes of business, which represent at least 85 percent of total casualty loss reserves. (This will exclude asbestos and environmental claims, which will be subject to separate analysis.)