Best, S&P Put RenRe’s U.S. Operations under Review/Negative

A.M. Best Co. and Standard & Poor’s Ratings Services have both placed their credit and financial strength ratings on RenaissanceRe’s U.S. insurance companies under review with negative implications.

The actions follow yesterday’s announcement that RenRe has entered into a definitive agreement to sell its U.S. P/C businesses to QBE Holdings Inc. S&P said its actions affected the ratings of Glencoe Insurance Ltd., which RenRe will retain, Stonington Insurance Co., Lantana Insurance Ltd., and Stonington Lloyds Insurance Co., all of which are RenRe subsidiaries.

However, both rating agencies made it clear that the actions only affected the U.S. subsidiaries, and not those on RenRe and subsidiaries operated from Bermuda. S&P credit analyst Taoufik Gharib explained that the CreditWatch placement reflects our view that we could either affirm or lower the ratings” on the companies listed above. “The ratings on RenaissanceRe Holdings Ltd. and its other subsidiaries are not affected by this transaction.”

Best indicated that it would resolve the “under review status” once the transaction has closed and it has completed its analysis. Best said it will “consider the strategic importance, integration plan and any explicit support to be provided by QBE going forward. Similarly, for Glencoe Insurance Ltd., which will be retained, the strategic importance and any explicit support to be provided by RenaissanceRe Holdings Ltd. will be considered.”

S&P is also analyzing the impact of the sale on the three companies that QBE is acquiring, and will assess their importance to QBE. “If we consider them to be strategically important subsidiaries and believe their stand-alone credit characteristics plus QBE Holdings Inc.’s implicit support are below that of the current ‘A+’ rating, we could lower the ratings by one notch,” S&P said. “Conversely, if we consider these three entities core subsidiaries of QBE Holdings Inc. based on explicit support, we could affirm the ratings.

As far as Glencoe is concerned, S&P said it expects “to resolve the CreditWatch status of those ratings within 90 days following an evaluation of the new strategic objectives and assessment of Glencoe Insurance Ltd.’s future business and financial profile. In addition, we will evaluate what type of explicit support Glencoe Insurance controlled.”

Sources: A.M. Best and Standard & Poor’s