S&P Issues Updated Bond Insurance Rating Criteria (MBI) (AGO) (RDN) (PMI) (MTG)
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Standard & Poor's Ratings Services has published updated methodologies and assumptions for rating bond insurers.
The updated criteria, outlined in the article, "Bond Insurance Rating Methodology And Assumptions," are a significant recalibration of bond insurance criteria and are intended to enhance the comparability of bond insurer ratings with ratings in other sectors, such as corporates, municipals, sovereigns, collateralized debt obligations, and other areas of insurance ratings.
The criteria apply to ratings on all bond insurers or companies with similar strategies or product offerings, such as some derivative products companies.
The criteria define a comprehensive process that considers a common set of 11 analytic categories used to form the rating conclusion. The analytic categories considered are industry risk, competitive position, management and corporate strategy, operating performance, capital adequacy, investments, largest obligors, financial flexibility, enterprise risk management, liquidity, and leverage. The process in these criteria then synthesizes these elements according to a common framework, which is divided into two major segments: financial risk profile and business risk profile.
In accordance with our policies and procedures, we will meet with senior management of the bond insurers to review the published criteria and discuss the impact the criteria may have on existing ratings. The discussion with the bond insurers will enable them to present any current plans they may have relating to the new criteria. The criteria are effective immediately, and we expect any rating changes to occur following our review of third-quarter 2011 financial statements, but no later than Nov. 30, 2011.
The updated criteria, outlined in the article, "Bond Insurance Rating Methodology And Assumptions," are a significant recalibration of bond insurance criteria and are intended to enhance the comparability of bond insurer ratings with ratings in other sectors, such as corporates, municipals, sovereigns, collateralized debt obligations, and other areas of insurance ratings.
The criteria apply to ratings on all bond insurers or companies with similar strategies or product offerings, such as some derivative products companies.
The criteria define a comprehensive process that considers a common set of 11 analytic categories used to form the rating conclusion. The analytic categories considered are industry risk, competitive position, management and corporate strategy, operating performance, capital adequacy, investments, largest obligors, financial flexibility, enterprise risk management, liquidity, and leverage. The process in these criteria then synthesizes these elements according to a common framework, which is divided into two major segments: financial risk profile and business risk profile.
In accordance with our policies and procedures, we will meet with senior management of the bond insurers to review the published criteria and discuss the impact the criteria may have on existing ratings. The discussion with the bond insurers will enable them to present any current plans they may have relating to the new criteria. The criteria are effective immediately, and we expect any rating changes to occur following our review of third-quarter 2011 financial statements, but no later than Nov. 30, 2011.
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