Fitch affirms ACE

Fitch Ratings has affirmed the ratings of ACE Limited and its subsidiaries (ACE) following Fitch’s downgrade of Bermuda’s sovereign long-term Issuer Default Ratings (IDR) and country ceiling rating. 

On June 7, 2013, Fitch downgraded Bermuda’s long-term foreign currency IDR to ‘AA-’ from ‘AA’, the long-term local currency IDR to ‘AA-’ from ‘AA+’ and the country ceiling rating to ‘AA+’ from ‘AAA’. 

The Rating Outlook was revised to Negative from Stable.

ACE’s ‘AA’ IFS ratings are now one notch above the sovereign long-term foreign currency and local currency IDR. 

According to Fitch’s Insurance criteria, very strong organizations can typically be rated one to two notches above the long term sovereign rating. 

In the specific case of ACE, Fitch has determined it may be rated two or more notches higher than the sovereign rating. Although ACE has significant operations in Bermuda, the company’s large and diverse global profile, with assets, insurance premiums and underwriting exposures spread across many countries, limits the exposure to Bermuda sovereign risk. ACE does not hold any Bermuda sovereign debt.

Bermuda downgrade

Additionally, a Fitch downgrade of Bermuda long-term foreign currency IDR to more than two notches below ACE’s IFS rating, may promote consideration of a downgrade in ACE’s ratings. Fitch notes that ACE’s debt ratings currently benefit from narrower notching relative to the insurance company financial strength ratings as a result of Bermuda’s moderate regulatory environment. 

This narrower notching may be revised in the future as Fitch evaluates the impact of Solvency II and other possible regulatory changes on Bermuda’s insurance regime.