Investors and other market participants have increasingly asked when Fitch may revise Outlooks on insurance company ratings to Stable. In response, Fitch’s report highlights the broad framework under which market conditions and other factors would be used to make a determination for any changes.
From a macroeconomic perspective, Fitch believes that the immediate economic crisis has passed with some signs of stabilization in the market. However, Fitch also notes that continued uncertainties make it unlikely that Fitch’s Negative Outlook on the sector would change before the end of 2009 or even into 2010. Fitch notes also that some additional ratings on individual insurers would need to be downgraded before stabilization is appropriate.
Fitch envisions a stabilization of ratings after all or most of the following are present:
- The economy and capital markets recover to the point that future losses implied by Fitch’s Severe Stress, or by current unrealized losses, can be materially reduced within our range of possible forecasted outcomes;
- Any lags in asset write downs (or liabilities recognition) have been made, or can be reasonably predicted to be at manageable levels;
- Insurance companies more broadly gain renewed access to sufficient new, affordable capital, and;
- Any insurance-specific concerns contributing to a Negative Outlook abate, or do not materialize.
