Standard & Poor’s Ratings Services announced that it has developed criteria to detect finite reinsurance in the financial statements of insurance companies and adjust their earnings accordingly. S&P noted that in the extreme finite reinsurance is a “form of financial leverage that is sold as reinsurance.”
S&P said the report entitled “Property/Casualty Insurance Criteria: Adjusting For Finite Reinsurance,” explains “a two-step process by which it requests reinsurance contracts and related documents from all interactively rated insurance and reinsurance companies and compares the economic impact of each contract with its accounting treatment.”
S&P credit analyst Steve Ader noted: “If we see a reinsurance contract where the accounting does not match economic reality, we will adjust the accounting and resultant impact on earnings and capitalization. We will factor these adjustments into our ratings consideration.”
The report explains that the procedures involved in detecting and adjusting for finite reinsurance, which is also called financial reinsurance and financial engineering, are not new to S&P. “We always looked for finite reinsurance, but now we have established, codified procedures by which we do so,” stated Thomas S. Upton, who leads S&P’s property/casualty team.
The rating agency will hold a teleconference on Friday, March 18, 2005, at 10:30 am EST, featuring an overview of its finite reinsurance criteria. “If you would like to submit a question via e-mail, please send your question to eventsmarketing@standardandpoors.com at least one hour prior to call start time. Please note that Standard & Poor’s offers all of its broadcast teleconference calls to all interested participants on a complimentary basis. The call will begin promptly at the time indicated.
Please call at least 15 minutes before the scheduled start of the call to complete the pre-call registration process. For callers in the U.S., the number is (1) 484-630-6046. Callers elsewhere can participate in the teleconference by calling (44) 20-7943-5370. The conference ID# is 6501079, and the passcode is SANDP.
The report is available to subscribers of RatingsDirect, Standard & Poor’s Web-based credit research and analysis system, at www.ratingsdirect.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-9823 or sending an e-mail to: research_request@standardandpoors.com. Ratings information can also be found on Standard & Poor’s public Web site at www.standardandpoors.com; under Credit Ratings in the left navigation bar, select Find a Rating, then Credit Ratings Search. All Standard & Poor’s research information is accessible for 24 hours after publication on the public Web site.
Topics Reinsurance
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