Folgate Insurance is considering legal action over comments by Standard & Poor's (S&P) that question its financial strength.
But the rating agency is standing by its BB (marginal) rating for Folgate, as well as those awarded to two other insurers – BB (marginal) to Trafalgar and B (weak) to Ansvar.
“We will change the ratings if there is a material fact that we are not aware of,” said S&P director David Laxton, “but in the absence of anything new, I don't think there is any reason to do so.”
Folgate deputy managing director Darryl Clark said this week that the insurer was continuing to seek clarification from S&P.
He said Folgate remained aggrieved at an S&P press release of March 16 and had taken legal advice on the matter.
Clark said that Folgate was also in contact with its German parent group, Wüstenrot & Württembergische, and expected it to issue a “statement of comfort” confirming Folgate's sound financial footing.
In a significant move, S&P last Thursday issued another press release clarifying its comments on Trafalgar, after it was contacted by the company's parent Cornhill.
It said it had previously omitted factors concerning Trafalgar which were “emphasised” by Cornhill.
These were that Trafalgar was a wholly-owned subsidiary of Cornhill (rated AA-), which in turn was a member of Allianz (rated AAA).
In addition, Cornhill had injected £20m into Trafalgar in the past two years.
S&P's most recent statement also admitted that Cornhill had undertaken to maintain Trafalgar's solvency margin above the statutory minimum until June 2004 at least.
Cornhill spokesman Mark Bishop said it was satisfied that the new S&P press release resolved the matter.
“We have been in high-level discussions with S&P from the moment this story broke, and we are extremely pleased that they have publicly recognised the financial strength and security behind Trafalgar,” he said.
But Graham Doswell, chairman of Ansvar, is still having “sensible” discussions with S&P over its rating.
“I think S&P have based their
press release on out-of-date information,” he said. “Ansvar is far from
vulnerable.”
S&P said its ratings were based on the companies' published accounts and DTI regulatory data for 1999.
