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The purpose of the review was to identify the impact on ratings as a result of the updated insurance notching criteria. Fitch published its updated insurance notching criteria on 14 July 2015, following the publication of an exposure draft of the criteria on 12 May 2015. The updated notching criteria appear in Section VI of the insurance master criteria report Insurance Rating Methodology.
Notching refers to the practice of establishing a given rating relative to a defined "anchor" rating, using guidelines linked to certain characteristics of the rating that is being notched. For Fitch's insurance ratings, the Insurer Financial Strength (IFS) Rating is the initial anchor rating, and other ratings that are notched relative to it include Issuer Default Ratings (IDRs) of operating and holding companies, and debt/hybrid obligation ratings.
Fitch updated its notching criteria in light of changes in the regulatory landscape, including the move in Europe and other jurisdictions to a Solvency 2 or a Solvency 2-type regulatory framework. As a result, from a global perspective, notching changes are more pronounced in Europe and other such jurisdictions than in the U.S. and similarly regulated countries.
For this rating review, the key rating driver was the impact of the updated notching criteria. The summary report includes:
Report: Insurance notching review for UK non-life sector (Fitch Ratings subscription required)