Fitch sets priorities for changing of ratings

It appears that many of the factors that are presently contributing to the negative outlook being put forth by Fitch Ratings as regards the global insurance industry are probably not going to see any improvement in the foreseeable future so as to allow for any possible revision leading to a Stable Outlook. Fitch made known in a recent report that they published, the signs that they are looking for as a signal of a possible Outlook improvement. This includes an indicator of the strength of the economy’s recovery, in addition to improved financial flexibility and capital access as well as a greater certainty with regard to investment valuations.

During the year 2008, Fitch found it necessary to move its Rating Outlooks to Negative, as regards all regions and segments of the worldwide insurance industry. The advent of the continual mounting up of instabilities with regard to the economic and operating environments has ultimately caused Fitch to downgrade in access of 40% of its rated insurance groups dieting back to the fourth-quarter of last year. in addition, in access of 60% of Fitch's rated insurance entities have been assigned either a Negative Outlook or have been placed on the list for companies that are Rating Watch Negative.

The request from investors as well as other market participants has increasingly been when will Fitch revise Outlooks on insurance company ratings to the level of Stable. In response to this, in their reports Fitch report highlights the overall framework by which market conditions and other factors would be utilized to create a determination for any changes.

Taken from a macroeconomic perspective, Fitch assumes that the immediate economic crisis is essentially over and there are even some signs of stabilization in the market. Nevertheless Fitch in addition has made note of the fact that there are continued uncertainties that are making it unlikely that Fitch's Negative Outlook on the sector will change anytime prior to the end of 2009, and this may even reach into 2010. Fitch also notes that there are some added ratings covering individual insurers that will need to be downgraded before it will be appropriate to indicate stabilization.

From Fitch’s perspective stabilization of ratings will be possible after most or all of the following occur:

--There is a recovery of the economy and of capital markets so much that implied future losses suggested by Fitch's Severe Stress, or as the result of current unrealized losses, may be materially reduced within the context of the company’s range of possible forecasted outcomes;

--Any falling behind in asset write downs (or in liabilities recognition) have been carried out, or they can be reasonably predicted to stand at manageable levels;

--it becomes possible of insurance companies to more broadly gain renewed access to adequate new, affordable capital, and;

--And there is an abatement of insurance-specific concerns that may contribute to a Negative Outlook, or they fail to materialize.

Fitch also sees the timing for the stabilization of ratings as very likely differing in accordance with insurance segment and geographic region.