Fitch Ratings' New Model Spotlights Capital Issues

Fitch Ratings said its new capital model has affected the rating of eight property-casualty insurance companies, and an analyst said the model also identified some potential financial problems in the sector's future.

James B. Auden, senior director, insurance, in the rating agency's Chicago office, during a conference call today to discuss Fitch Ratings' new model named Prism said that p-c insurers will need greater capital requirements as the soft market continues.

He said despite market growth, underwriting results are deteriorating. If that deterioration continues, insurers will need to increase capital to cover those risks, he noted.

Insurers, said Mr. Auden, are susceptible to downturns in their investments, which could affect capital.

Finally, he said, pure auto insurers produce the strongest results of any carriers in the Prism model because of a lack of catastrophe risk and volatility in the auto line.

In a report published today, Fitch released the Prism scores for 99 U.S. life and p-c insurance groups which resulted in rating actions for seven p-c- insurers:

o CNA Financial Corporation's Insurer Financial Strength (IFS) rating was upgraded one notch from "A-minus" to "A."

o The Doctor's Company Group's IFS rating of "A-minus" was placed on rating watch "positive" on Oct. 16.

o HCC Insurance Holdings Inc.'s IFS was upgraded from "double-A-minus" to "double-A" on Oct. 15.

o PMA Capital Corp. received a rating upgrade on Sept. 25 to "triple-B-plus" from "triple-B-minus."

o ProAssurance Corporation's IFS rose on Nov. 6 from "A-minus" to "A."

o RLI Corp. had its "A" rating moved to a positive outlook on Oct. 1.

o Safeco Corporation's ratings were upgraded on Oct. 1 from "double-A-minus" to "double-A."

The p-c insurance groups reviewed make up approximately 63 percent of the total U.S. p-c industry with $284 billion of industry net written premium.

The report and additional information is available at www.fitchratings.com/prism.