Most listed insurers average A to AA ratings, yet six have just one agency rating. Beazley could gain from closer ties to Zurich.
Strong average ratings across European commercial insurers offer reassurance to buyers, but the limited number of agencies covering several carriers leaves a thinner view of their credit standing. The distinction matters: these insurers’ risks vary more than those of reinsurers, and their use of reinsurance to transfer severe losses also differs.
For large commercial policyholders, ratings speak to whether an insurer has the scale and financial strength to cover risks that could threaten a business. The typical average falls between A and AA, according to Litmus Analysis’ Composite Scores. That strength is primarily relevant to each insurer and its clients; the broad, sector-wide capital exposure that can make reinsurance ratings systemically significant is less likely to apply in the same way to European commercial lines.
One rating agency covers six insurers
The number of agency assessments is lower than on the European commercial list’s reinsurance counterpart. Six insurers in the reference group have a rating from only one agency: Ergo Versicherungs, MMA IARD and Vienna Insurance from S&P; Gan Assurances and R+V Allgemeine from Fitch Ratings; and Mapfre Espana from A.M. Best.
Some parent groups have two or more agencies rating other parts of their operations. That pattern suggests commercial insurance buyers may be less likely than reinsurance buyers to require multiple agency views of the specific insurer providing cover. My read is that this is a notable gap, given how consequential commercial lines policies can be to the companies buying them.
Ratings are forward-looking opinions, so they can look too high or too low in hindsight. A second agency’s assessment can give buyers another perspective on an insurer’s financial strength. That may be especially relevant for commercial buyers accustomed to seeing multiple ratings when arranging reinsurance for a captive.
Beazley’s potential rating lift after Zurich deal
Zurich Insurance’s acquisition of Beazley shows why an upgrade can matter even when a carrier already has strong ratings. Beazley’s Lloyd’s syndicate gives policyholders access to paper with an average rating of AA-. Beazley Insurance DAC, by comparison, has a Litmus Composite Score mapping of A+, based on ratings from A.M. Best and Fitch.
With the Zurich transaction closed, both agencies may regard Beazley’s rated insurers as strategically important to Zurich and could raise their ratings to AA- or AA. That outcome isn’t assured, but the prospect is relevant to buyers of long-tail and specialty coverage, for whom a higher rating can carry weight even near the top of the scale.
Policyholders with coverage across both groups will also have greater concentration at the group level. Beazley’s position in cyber insurance could make a rating increase particularly meaningful for some of its clients. The deal may also prompt Moody’s and/or S&P to rate Beazley insurers in time; both agencies currently rate insurers in the Zurich group.
About the Litmus Composite Score
Business Insurance and Litmus Analysis periodically assess selected insurers and reinsurers in North America, Bermuda and Europe, as well as global reinsurers. The Litmus Composite Score combines ratings published by major agencies into an average score.
The score and its mapped rating are not Litmus’ own opinion of an insurer or group. Litmus is not a rating agency and does not issue rating opinions. Insurers within the same group can carry different ratings, and agency assessments can change. Buyers should consult agencies’ public ratings websites for current assessments.
Details on the score’s methodology, rating-scale comparisons and the treatment of ties are available at www.litmusanalysis.com/litmus-composite-score or from Litmus at [email protected].
Stuart Shipperlee is head of analysis at Litmus Analysis in London. He can be contacted at [email protected].
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