While it may not be Lloyds of London, the upgrade of The Hanover Group last week was positive news for U.S. insurers.
I mention Lloyds, because it is seeing its heyday right now, at a time when some other large insurers arent doing as well. As I have written recently, Lloyds renaissance is attracting risk managersunder scrutiny from their boardswho are shopping the London Markets.
Their boards, more than ever and rightly so, are asking questions about the financial strength of their insurers. Theyre also looking at spreading risks over several insurers. Boardand other pressures are motivating risk managers Ive talked to, to go to great lengths to research insurers financial security. Buyers say they are not relying on just ratings orthe recommendations of their brokers as they may have in the past. After all, their jobs could be on the line.
Hanover was ecstatic when I spoke to them last week about their upgrade by A.M. Best, from A-minus to A. Hanovers CEO, Frederick H. Eppinger, was extremely pleased with the announcement. He said his plan has been to build the company into a world-class institution that will last through the cycles.
This is difficult to achieve in the U.S., he said, because most downgraded p-c insurers have their ratings lowered because of asbestos and other environmental exposures that are frankly hard to get out of. You can get into a death spiral based on balance sheet. He said Hanover was fortunate in that it never had any of those challenges. Rather, it was risks from its life company that created capital pressure.
This upgrade is exactly what buyers need now, to help build overall confidence in the U.S. markets. The companys achievementespecially at a time when some insurers are not cast in the best lightis commendable and sure to be noticed by many.
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