S&P Global Ratings has upgraded Fairfax Financial Holding and its re/insurance subsidiaries, which include Odyssey Re and Allied World amongst others, on revised criteria and assigned a positive outlook.

The agency raised its long-term issuer credit rating on Fairfax Financial Holdings to ‘BBB+’ from ‘BBB’. The long-term issuer credit and financial strength ratings on Fairfax’s core re/insurance operating subsidiaries were raised to ‘A+’ from ‘A’.

At the same time, S&P removed all ratings from CreditWatch, where it placed them with positive implications on December 4, 2023.

These rating moves are the result of S&P’s implementation of its revised criteria for analysing insurers’ risk-based capital – published on November 12, 2023 -, which led to higher levels of capitalization for Fairfax.

Additionally, under this revised criteria, Fairfax enjoys a higher diversification benefit as a global re/insurer, with a diversified business profile, leading to a material reduction in the required risk-based capital, the agency noted.

It was also stated that the positive outlook reflects S&P’s view that the ratings on Fairfax could be raised if the company maintains its underwriting discipline and meets or exceeds expectations while executing its strategy.

The agency added: “The positive outlook signals that we could raise our ratings by one notch in the next 12-24 months if Fairfax successfully manages its capitalization sustainably at the 99.95% confidence level, while meeting or exceeding our expectations of strong and more stable operating earnings, and further reducing its financial leverage.”

But if Fairfax fails to meet S&P’s expectations, the agency could revise its outlook to stable or lower its ratings in the next 12-24 months.

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