Channel Re Hit In Rating Report
Standard & Poor's this week has revised its outlook on Bermuda-based Channel Reinsurance Ltd. from stable to negative while maintaining the company's AAA financial strength rating.
"The outlook revision reflects concerns regarding the level of staffing at Channel Re relative to the size of its portfolio and volume business, as well as the process and performance of its board and committees," the S&P report said.
The AAA rating reflects the company's strong capital position and steps taken by the investors to ensure parity between the risk assumed by the company and that retained by MBIA Insurance Corp, its sole source of business, S& P said.
MBIA Inc. is the largest U.S. municipal bond insurer and owns a stake in Channel Re.
S&P analyst David Veno said the fact that MBIA's investment in Channel Re, along with the need for a Triple-A reinsurance capacity, somewhat aligns their interests. But there still remains the risk to Channel Re investors of adverse selection of risk ceded by MBIA.
Mr. Veno also expressed concern about the outcome of current inquiries conducted by the Securities and Exchange Commission and the New York Attorney General's Office as to the nature of MBIA's relationship with Channel Re.
Channel Re has five full-time staffers, one of whom is an administrator and office manager overseeing a $30 billion book of business, the credit agency said in its report.
Armonk, N.Y.-based MBIA issued a statement saying "that as an investor in Channel Re, MBIA will work with Channel Re and other Channel Re investors to address any issues that S&P has raised in their recent report."
"S&P's outlook revision on Channel Re to negative has no impact on MBIA's claims-paying resources or capital position," the statement said.
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