S&P Downgrades Conn. Surety Co. in Response to Rehabilitation Order

Standard & Poor’s has revised its financial strength rating on Connecticut Surety Co. to ‘R’ in response to an order of rehabilitation obtained by Commissioner of Insurance Susan F. Cogswell. The new rating indicates that the insurer is under regulatory supervision. A.M. Best Company had downgraded Connecticut Surety’s rating to E (Under Regulatory Supervision) on February 20.

The order took effect on Feb. 6 and gives the commissioner statutory control over Connecticut Surety and the ability to thoroughly analyze, evaluate and oversee the company’s finances. The insurer, licensed in 24 states and the District of Columbia, discontinued writing new business and reinsured 100 percent of its renewals effective June 1, 2000. The insurance department indicated that the reinsurance agreements do not cap the liability of reinsurers.

Commissioner Cogswell explained that the department had to resort to rehabilitation because Connecticut Surety’s financial condition was deteriorating.

“I took the step of asking the court to put The Connecticut Surety Company into rehabilitation in order to protect the policyholders, as the company in recent months has had a significant liquidity problem and has been unable to restore itself to sound financial condition,” she said. “Rehabilitation will enable us to immediately marshal and protect all of the company’s assets for the benefit of policyholders and claimants.”