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When Fitch Ratings downgraded 35 insurance companies, or 42% of its 83 life company universe, earlier this month, it said the moves largely reflected changes in the industry.
There is not any significant deterioration of company ratings, but rather a change in the outlook for the industry and a change in the long-term way of looking at ratings, Julie Burke, managing director of Fitch, Chicago, explained during a conference call.
She said no company had been downgraded by more than two notches.
However, a representative of one insurer posed the question during the conference call of whether competing financial services industries, such as banks, are receiving the same kind of review from Fitch. Burke said that may be the case but she could not say definitively whether other reviews were being conducted.
The insurers representative feared that the slew of downgrades might push policyholders to other financial services sectors and become a “self-fulfilling prophecy” given the “intense competition.”
But, throughout the conference call, Burke emphasized that the downgrades were “not deep shifts,” but rather “modest adjustments” to life insurer ratings.
Mutual insurers and companies selling traditional whole life products fared the best, according to Burke.