California Insurance Commissioner Addresses Insurer S&P Downgrade

California Insurance Commissioner Dave Jones yesterday issued the following statement in regard to the downgrade by Standard & Poor’s (S&P) of the credit rating of certain insurers from AAA to AA+ associated with the S&P downgrading of the U.S. credit rating from AAA to AA+:

“The recent downgrade by ratings agency S&P of the credit rating of U.S. government securities from AAA to AA+ has resulted in a downgrade by S&P of the credit rating of some large insurers with significant investments in U.S. government securities from AAA to AA+. The reason for S&P’s downgrade of some insurers is its policy that no insurer with significant investments in U.S. securities may have a rating higher than the rating of those securities.

“While an AAA rating is the highest possible rating, an AA+ rating is a very strong financial rating. These rating actions have no impact on insurer investments in U.S. government and government-related securities and therefore no impact on insurers’ financial reporting of risk-based capital and asset valuation reserves. Further, S&P’s downgrade to AA+ has no impact on insurers’ claims paying abilities. The California Department of Insurance and other states’ insurance regulators will continue to exercise strong financial oversight and carefully monitor the financial condition of insurers.”

Source: California Department of Insurance.