HAMILTON, Bermuda—XL Capital Ltd.'s financial troubles are causing some insurers to rethink their underwriting relationships with the Bermuda-based insurance company.
Market sources say some insurers are reacting to the recent financial-strength rating downgrade to A from A+ of XL's core companies by Standard & Poor's Corp. by refusing to participate in coverage programs that include XL on long-tail exposures.
Allianz Global Corporate & Specialty confirmed that it has made such a move. A spokesman for the Munich, Germany-based insurer said in an e-mail that the S&P downgrade of XL's financial-strength rating "reflects the belief that XL's prospective competitive position and resulting underwriting performance have diminished because of perceived franchise issues stemming from a number of material earnings and capital charges over the past several years and a belief that renewal activity will be below historical norms."
Allianz remains confident that XL can meet its obligations regarding short-tail business, the spokesman said. "However, we can no longer front long-tail business for XL. This is not a negative move against XL but rather a result of the recent downgrade because it affects our own risk exposure."
XL's downgrade means the insurer's rating "no longer meets Allianz Group criteria for long-term business," the spokesman said.
Meanwhile, A.M. Best Co. recently decided to leave unchanged the A financial strength rating it has assigned to XL's core operating companies.
A spokeswoman for XL could not be reached to comment on the move by Allianz.
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