XL Capital Group placed on CreditWatch

Standard & Poor’s Ratings Services has placed its ratings on XL Capital Group (XL) on CreditWatch, based on the uncertainty around Hurricane Katrina’s ultimate impact on XL’s capital adequacy ratio.
The ratings and outlook on XL’s ‘AAA’ rated financial guaranty companies (i.e., XL Capital Assurance and XL Financial Assurance) remain unaffected.
Standard & Poor’s action is part of a process that began one week ago, when the ratings service placed 10 other insurers and reinsurers on CreditWatch.
“We elected to place these companies on CreditWatch due to the rapidly rising estimates for total insurance losses currently about $60 billion and due to the admission by several primary and reinsurance companies that their original loss estimates were on the low side,” explained Standard & Poor’s credit analyst Mohammed Ashab. “In general, the companies placed on CreditWatch are judged to have exposures to this event proportionately higher than other companies.”
Standard & Poor’s said it believed the companies of the XL Capital Group have sufficient risk-management and risk-mitigation skills, capital, and liquidity to accommodate the losses they are likely to incur.
“Although the models used in the industry for predicting catastrophic losses from hurricane scenarios are still being upgraded to measure more risk notably subsequent flood risk insurers and reinsurers with the greatest exposure generally are not currently able to fully assess the magnitude of their potential losses,” says Ashab.
“Today’s placements highlight the continued material uncertainty in accurately quantifying the insurance industry’s ultimate exposure, but as we mentioned in our Sept. 9th announcement, downgrades of these ratings are not inevitable.”
Standard & Poor’s says it will be meeting shortly with the managements of all the companies placed on CreditWatch and expect to resolve the status of most of the listings within 90 days.