P&C insurers CAT risk assessments amended

Standard & Poor’s Ratings Services has revised its criteria for measuring the catastrophe risk of primary property and casualty insurance companies, according to a recent S&P’s article. The article “Property/Casualty Insurance Criteria: Primary Insurer Catastrophe Capital Charges Revised” says that the new criteria will capital-charge CAT risk with company-specific data for exposures, so this new catastrophe charge reflects each company’s particular risk profile. Previously, S&P’s charged catastrophe risk for primary insurers using its premium risk factors (C3) within the risk-based capital adequacy model. “The reason for this change is partly to have consistent criteria across the insurance and reinsurance sectors,” S&P’s credit analyst Damien Magarelli says. “Also driving the criteria revision were the hurricane events of 2005 and, just as significantly, the frequent catastrophe events in 2004 in the Southeast U.S. and in Japan.” According to S&P’s, these events demonstrated that primary insurance companies face a significant amount of catastrophe risk and volatility within reported results. The recent amendments to criteria will not affect reinsurers, as S&P’s already revised reinsurers criteria for measuring CAT risk in July 2005.