Mr. Modecki had written Mr. O'Neill seeking a retraction after the quote by Don Watson, then Standard & Poor's managing director for insurance, appeared Aug. 1 in The Wall Street Journal. Mr. Watson has since taken a position at ACE Ltd. [see NU, Aug. 12, p. 29].

In response to Mr. Modecki's Aug. 1 letter, asking if he stands by the quote, Mr. O'Neill replied Aug. 12, "While the words Mr. Watson used could be considered controversial, the message in the context of the article?that single-parent captives and self-insurance introduce vulnerability to corporate income statements?is one that we believe to be true."

Mr. O'Neill continued in the letter, a copy of which was supplied to NU Online by CICA, that, "While we agree that the majority of existing captives are financially sound (we have assigned secure-range financial strength ratings to several), the specialist underwriting, pricing, and reserving skills required to successfully create and manage a captive are substantial, and the absence of them lead to serious vulnerabilities to such companies."

Mr. Modecki said Mr. O'Neill's response, "As far as I was concerned was a non-answer. It's like saying an airplane is an explosion waiting to happen if you don't have a good pilot."

Mr. Modecki said CICA has extended invitations to S&P and Moody's to attend its members-only meeting in New York on Oct. 14.

"CICA hopes to do a presentation with Moody's and S&P on how they view and rate captives," Mr. Modecki said. "So far, the organizations have not confirmed."

Mr. Modecki said he didn't know whether the issue would be resolved at the October meeting, but "I would hope that we could at least clarify the positions of the two organizations because S&P's comments are not very highly complimentary to the captive industry and, at the same time, Moody's is starting a captive."

If the organizations are rating captives, Mr. Modecki explained, "it seems that we do a service to our members if we at least give them a heads up. They have a choice on which group to rate them if they get rated; I would think they would prefer to be rated by Moody's, which has its own captive and hasn't said anything derogatory about the product."

Mr. Modecki said "there is probably a big distinction between the way they [S&P and Moody's] view captives."

The issue, he said, is "hot on the table" because S&P has just begun rating captives. "We're not aware of any that they've given a poor rating to at the moment, and there just seems to be a difference of how one views captives."

Whether the organizations will accept CICA's meeting invitation remains to be seen, he said. "All you can do is invite them. If they don't show, you let the membership know they don't think enough of you to show."