S&P Downgrades ALAS

By Michael Ha

NU Online News Service, Dec. 1, 2:25 p.m.EST?Standard & Poor's Ratings Services has cut itscounterparty-credit and financial-strength ratings for Attorneys'Liability Assurance Society Ltd. and its Attorneys' LiabilityAssurance Society Inc. Risk Retention Group to "double-A-minus"from "double-A", with a "stable" outlook.[@@]

Commenting on the downgrade, the New York-based ratings agencyexplained that its decision was based on "a reevaluation of U.S.professional liability insurance risk trends" as well as theinsurer's position as "a mono-line writer in that sector."

S&P analyst Karole Dill Barkley told NationalUnderwriter, "It's still a very strong franchise. We see thestrength of the company as being consistent with that of prioryears. While this is a niche business, the company has actuallydone fairly well through a very difficult market environment."

But on the down side, she noted, the company has been subject tocontinued negative trends in loss activity. "As we look at thesector that it's in, there is an increase in severity trends?whichis also seen in other liability lines. There is just an increasedvulnerability there."

The main message from S&P, Ms. Barkley said, is that "westill think it's a very strong company. ?Double-A-minus' is still avery strong rating. We just think there is an added risk factorfrom the increase in severity trends relative to the size of thecompany."

Ms. Barkley also expressed her concern that ALAS remains highlydependent on reinsurance. "The reinsurers have continued to supportthe company well, but this dependency is another risk factor."

She noted that S&P's concerns were more reflective of "macroissues" that the insurer was dealing with, rather than micro issuesrelated specifically to the company.

Based in Bermuda, ALAS offers attorneys' liability insurance.The company reported $265 million for gross premiums last year,with $117 million in net premiums.