A rating agency is setting up a division that will evaluate securities linked to insurance.
Fitch Ratings, New York, says the new insurance-linked securities team will rate life insurance securitizations as well as catastrophe bonds and other property-casualty insurance-linked securities.
Fitch is starting the unit because it expects volume to increase to more than $11 billion this year, from $8.9 billion in 2006 and $5.6 billion in 2005.
Those totals include private placements as well as public offerings, according to Don Thorpe, a Fitch senior director.
Fitch expects most of the growth in volume to come on the life side, as a result of insurers’ need for relief from Regulation Triple-X surplus requirements in the United States and general increases in life surplus requirements in Europe.
The new Fitch insurance-linked securities group will evaluate contracts securitized to provide statutory relief from Regulation Triple-X, life insurance securitizations and catastrophic mortality securities, but it will not evaluate life settlements, Thorpe says.
Catastrophic mortality securities include arrangements that protect insurers against the risk of incidents causing catastrophic loss of human life, such as a bird flu pandemic, Thorpe says.
The ILS group uses the existing ratings structure to assign securities grades ranging from D to AAA, Thorpe says.