As regulators crack down on rating agencies to update ratings, Fitch Ratings confirms that 99% of its U.S. Structured Finance ratings have been formally reviewed during the past 12 months as of August 2010.
In September, the National Association of Insurance Commissioners (NAIC) requested that Fitch and other rating agencies provide this information in response to recent NAIC rule changes. According to the changes, U.S. insurers may use structured finance ratings from acceptable rating organizations in certain risk-based capital calculations only if it can be confirmed that the rating has been reviewed within the past 12 months.
Structured finance represents close to 20% of invested assets among U.S. insurers, according to Fitch estimates, and capital charges can increase substantially if those assets do not carry current ratings.
“Investors and regulators have become increasingly focused on confirming that ratings are not only informative but current,” says Doug Murray, group managing director and head of global structured finance business relationship management for Fitch. “Increased cost of capital can be caused by any number of factors, but stale structured finance ratings should not be one of them.”
The rating agency says that its ratings are constantly monitored and updated as appropriate, and it takes a formal rating action on every transaction at least once annually.
On a transaction-by-transaction basis, a user can verify the date a transaction was last reviewed by looking at the rating history for any class and noting the date of the last rating action.
In order to help users avoid stale ratings and to promote transparency, Fitch includes a Rating Effective Date field in its data feed so users can see when the last action took place. Users can access this information through Fitch’s Ratings Delivery Service (RDS) or Fitch’s website.
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