All ratings currently carry stable outlooks.

Rating reviews of the four insurers were initiated following the passage of new resolutions by the Argentine National Insurance Superintendent in 2011 requiring Argentine insurers to repatriate their foreign investments and curtailing the direct purchase of reinsurance from international reinsurers, including from international affiliates.

Subsequently, Moody's initiated an updated assessment of the linkage between the credit profiles of sovereigns and locally domiciled financial institutions globally.

This prompted the review of Provincia Seguros and was also a consideration in resolving the other 3 rating reviews, said Moody’s.

According to Moody's, the rating downgrades on the global local currency scale reflect multiple considerations.

These were:

• An incremental weakening of the credit profiles of these insurers' investment portfolios as a result of the legally mandated repatriation back to Argentina of higher-quality investments held outside the country and reinvestment in the local Argentine market, which has a much lower investment credit profile.
• The constraints on Argentine insurers' reinsurance cessions as mandated by the revised regulations, which particularly affect insurers that have relied more heavily on external cessions, including to international affiliates.
• The application of the rating implementation guidance with respect to linkages between the credit profiles of sovereigns and locally-domiciled financial institutions.
• And, finally, the application of the revised Ba3 sovereign GLC ceiling.

The downgrades of the companies’ NS IFS rating primarily reflect the lower GLC ratings, added Moody’s.

The downgrade of ACE Argentina's GLC IFS rating reflects the negative impact of the legally-mandated investment repatriation on the credit profile of the insurer's asset quality and, to a lesser degree, its capitalisation and risk-adjusted profitability, said Moody’s.

It also reflects the negative impact of the more restrictive nature of Argentina's revised reinsurance regulations.

The downgrade of Caruso's GLC IFS rating primarily reflects the company's high direct investment exposure to Argentine sovereign bonds and bank deposits, and the rating agency's view that strong linkages exist between insurers and sovereigns.

As with ACE Argentina, the downgrade of Chubb Argentina's GLC IFS takes into account the negative impact of the legally-mandated investment repatriation on the credit profile of the insurer's asset quality and, to a lesser degree, its capitalisation and risk-adjusted profitability.

It also reflects the negative impact of the more restrictive nature of Argentina's revised reinsurance regulations, and the application of the lower GLC sovereign ceiling for Argentina, explained Moody’s.

The downgrade of Provincia's GLC IFS rating to B3 from B2 reflects the company's ‘very high’ direct investment exposure to Argentine sovereign, bank-related and other local assets relative to capital, in the context of Moody's assessment of the linkages and correlation between sovereign and financial institutions’ credit risk globally. 

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