S&P: 10% of insurers and reinsurers to be affected by rating model change

S&P [4] has announced future changes in its model for calculating ratings assigned to insurance and reinsurance companies. The rating agency will be more demanding in terms of portfolio diversification, exposure to natural catastrophes and use of debt capital.

From now on, raising a large amount of equity is no longer the main guarantee of a company's stability. Other alternatives to mitigate risks are becoming essential.

According to the analyst group "Litmus Analysis", the transition to the new calculation model could affect the ratings of 10% of insurers and reinsurers.

It should be recalled that in November 2021, Fitch Ratings [5] had also updated its rating criteria for insurance companies. The updates had focused on:

• The way "Corporate Governance" is rated. The latter has become a sub-component of a new credit factor called "Corporate Profile",
• the specifics of the Industry Profile and Operating Environment (IPOE),
• Trade credit insurance (TCI) which has been separated from non-life insurance,
• the introduction of new ratios for the calculation of ratings.