Fitch Ratings publishes report on credit factors for global reinsurance companies

Fitch Ratings has issued a special report on credit factors it uses to analyze the global non-life and life reinsurance sector.

 The sector-specific factors are a supplement to the firm’s global master criteria “Insurance Rating Methodology” from Jan. 11, 2013. Those criteria influence Fitch’s core fundamental credit analysis of insurance companies and groups.

As with the global master insurance rating criteria, Fitch evaluates companies in the global reinsurance sector considering various qualitative and quantitative credit factors, including but not limited to: industry profile and operating environment, market position and size/scale, corporate governance, capitalization and leverage, financial performance and earnings, and liquidity.

“In its new special report, Fitch has placed the various building blocks used to formulate its ratings within typical ranges to increase the transparency of its analysis,” the firm said. “The report includes various median financial ratios by rating category, as well as charts that demonstrate how key qualitative factors can affect a typical rating range.”

Ratings for global reinsurance typically range between the ‘AA’ through ‘A’ category for Insurer Financial Strength (IFS) ratings and between ‘AA’ and ‘BBB’ for unsecured senior debt ratings.

Key reinsurance industry risk factors include cyclical pricing, intense market competition, pricing and reserving uncertainty, investment risk tied to fixed-income and equity holdings, catastrophe loss exposures, and regulatory issues.

The 113-page special report is available on Fitch’s website.