Best Puts Swiss Re’s Ratings ‘Under Review/Negative’

A.M. Best Co. announced that it has placed the financial strength rating of ‘A+’ (Superior) and the issuer credit ratings of “aa” of Swiss Reinsurance Co. and its similarly-rated subsidiaries “under review with negative implications.”

Best also placed all debt issued or guaranteed by Swiss Re under review with negative implications.

Therating actions follow the announcement on Monday by Swiss Re that it was writing down CHF 1.2 billion ($1 billion) in a mark-to-market loss, arising from its exposure to two credit default swaps written by its Credit Solutions unit.

“The loss has resulted from the unprecedented ratings downgrades in October and the lack of liquid markets for the underlying securities,” said Best. As Swiss Re explained the default swaps were heavily impacted by the subprime mortgage market crisis.

Best indicated that it plans to “discuss with Swiss Re’s management the potential for further write-downs arising from this exposure.” The rating agency also warned that even though the loss does not “exceed Swiss Re’s credit risk tolerance,” it will “further evaluate Swiss Re’s enterprise risk management in light of this unexpected loss and the steps Swiss Re has taken to minimize such financial risks in the future.”

Best’s action is markedly more severe from the position taken by Standard & Poor’s Rating Services, who announced that it did not plan to take any rating action at this time due to the write downs (See IJ web site Nov. 20).

For a complete listing of Swiss Re’s FSRs, ICRs and debt ratings go to: www.ambest.com/press/112003swissre.pdf.

Source: AM. Best