Slippery slope for EU insurers

Atradius today became the latest in a line of troubled European insurers to be downgraded over fears about its sovereign debt exposure.

Standard & Poor’s (S&P) slashed the trade credit insurer’s rating from A- to BBB amid concerns over the debt held by its main shareholder, Spanish insurer Grupo Catalana Occidente.

Atradius claims that the downgrade does not reflect the company’s strength, but brokers will be increasingly concerned after it joined fellow European insurers Mapfre and Groupama, who have both been downgraded in recent weeks.

Mapre and Groupama already stripped back

Spanish financial woes have heaped pressure on Mapfre following S&P’s recent downgrade of the government’s sovereign debt rating by two notches to BBB-.

As a result, the Spanish (re)insurance group was this month stripped of its A- insurer financial strength rating – a measure of an insurer’s ability to pay claims – with its core operating entities cut to BBB+ by S&P.

And the reverberations of the downgrade have been felt in the UK, where Mapfre’s operations include travel insurer Insurerandgo and Mapfre Assistance.

The downgrade also prompted UK-based aerospace insurer Global Aerospace to kick Mapfre off its panel of capacity providers.

Earlier this month, Groupama SA’s financial strength rating was cut one notch to BB- from BB by S&P after it decided not to pay interest on a bond.

The ratings are currently on negative watch, which means they could face a further downgrade.

Like Groupama, Mapfre has significant exposure to the eurozone crisis, with Mapfre exposed to Spanish sovereign debt and Groupama forced to write down billions of Greek debt.

Added to that, Gibraltar insurer Lemma Europe Insurance Company went bust last month after its Ukrainian sister company Joint Stock Insurance Company Lemma (Lemma Ukraine) ended its reinsurance agreement with the firm, leaving up to 7,000 policyholders seeking compensation from the Financial Services Compensation Scheme.

CMCs under fire from FOS

Meanwhile, claims management companies (CMCs) have come under fire from the Financial Ombudsman Service (FOS) chief executive Natalie Ceeney for ripping off consumers.

Ceeney said that many CMCs gave no value to their customers over mis-sold payment protection insurance (PPI), with some firms simply taking a complaints form from their customer and sending it to a PPI mis-seller without adding anything to the document.

It is not the first time that CMCs have been in the spotlight for dubious working practises, but there are some out there that offer a bona-fide service.