A.M. Best Downgrades Ratings of MAPFRE RE, Compania de Reaseguros, S.A.; Places Under Review with Negative Implications

LONDON--()--As a result of the continued negative developments regarding the eurozone sovereign debt crisis, A.M. Best Europe – Rating Services Limited is taking rating actions on a number of European (re)insurers. Amongst them, A.M. Best has downgraded the financial strength rating to A (Excellent) from A+ (Superior) and issuer credit rating to “a+” from “aa-”of MAPFRE RE, Compania de Reaseguros, S.A. (MAPFRE RE) (Spain), a key subsidiary of MAPFRE S.A. (Spain). Both ratings have been placed under review with negative implications.

These rating actions were driven by both MAPFRE S.A. and MAPFRE RE’s exposure to investments in several peripheral eurozone economies, in particular Spain and Portugal. This also reflects MAPFRE S.A.’s exposure to commercial property in Spain through its investment holdings.

A.M. Best’s rating actions on MAPFRE RE and other European (re)insurers reflect their exposure to the continued deterioration of the sovereign creditworthiness of several eurozone countries and the negative economic outlook for the region. A.M. Best has been actively monitoring this crisis and released reports on related (re)insurers’ exposure in September and November of this year. The rationale for taking rating action at this point is largely attributable to the current heightened level of credit and liquidity risk for insurers operating within the eurozone countries—most notably Italy and Spain. The perceived strain on the economies of these countries and companies operating within their borders is growing rapidly with very little evidence of a solution being formulated to address near-term concerns.

The ratings for Mapfre Re will remain under review with negative implications while A.M. Best examines these companies’ exposure to a prolonged adverse economic environment within the eurozone. Of particular concern to A.M. Best is the exposure to Italy and Spain’s sovereign bonds and the potential for contagion into other asset classes, particularly holdings of European bank securities. In addition, A.M. Best will assess the likely impact of a prolonged financial crisis and recessionary environment on these carriers’ market position and ongoing business operations.

Upward rating pressures are unlikely at this point.

Negative rating actions could occur if there were a worsening of risk-adjusted capitalisation tied to investment losses or a deterioration of the operating environment in key territories.

The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilised include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding Universal BCAR”; “Understanding BCAR for Property/Casualty Insurers”; “Rating Members of Insurance Groups”; “Natural Catastrophe Stress Test Methodology”; and “A.M. Best’s Ratings & the Treatment of Debt”. Methodologies can be found at www.ambest.com/ratings/methodology.

In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.

A.M. Best Europe – Rating Services Limited is a subsidiary of A.M. Best Company. Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2011 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

Contacts

A.M. Best
Carlos Wong-Fupuy
Senior Director - Analytics
+(44) 20 7397 0287
carlos.wong-fupuy@ambest.com
or
Stefan Holzberger
Managing Director - Analytics
+(44) 20 7397 0288
stefan.holzberger@ambest.com
or
Rachelle Morrow
Senior Manager, Public Relations
+(1) 908 439 2200, ext. 5378
rachelle.morrow@ambest.com
or
Jim Peavy
Assistant Vice President, Public Relations
+(1) 908 439 2200, ext. 5644
james.peavy@ambest.com

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Contacts

A.M. Best
Carlos Wong-Fupuy
Senior Director - Analytics
+(44) 20 7397 0287
carlos.wong-fupuy@ambest.com
or
Stefan Holzberger
Managing Director - Analytics
+(44) 20 7397 0288
stefan.holzberger@ambest.com
or
Rachelle Morrow
Senior Manager, Public Relations
+(1) 908 439 2200, ext. 5378
rachelle.morrow@ambest.com
or
Jim Peavy
Assistant Vice President, Public Relations
+(1) 908 439 2200, ext. 5644
james.peavy@ambest.com