International financial rating agency Standard & Poor’s (S&P) has placed its ‘BBB+’ financial strength rating of French re/insurer SCOR’s Brazilian subsidiary, SCOR Brasil Resseguros S.A. (SCOR Brasil), on CreditWatch negative.
The move comes in response to the rating agency placing its ‘BB’ long-term foreign and local currency sovereign credit ratings on the Federative Republic of Brazil on CreditWatch, with negative implications, on May 22nd, 2017.
The financial rating of SCOR Brasil is constrained by the local currency rating, explains S&P, which led to the Brazil-based reinsurer’s financial strength rating being placed under CeditWatch with negative implications.
S&P says that the financial strength of SCOR Brasil benefits from “a qualifying guarantee from its ultimate parent, SCOR SE,” continuing to explain that if its rating on a sovereign is speculative grade, then the ratings on guaranteed entities domiciled in that country could be as much as “four notches” higher than the local currency sovereign rating.
Furthermore, S&P explains that it could lower the ratings on SCOR’s Brazilian unit within the next 90 days, were it to take a similar rating action on the sovereign. While the rating agency explains that it could also affirm the ratings on SCOR Brasil if it were to take a similar rating action on Brazil.
S&P says it aims to resolve the CreditWatch placement within three months.