S&P: View of six Mexico insurers to negative

S&P said it revised the outlook on the global scale ratings of six Mexico-based insurers to negative after a similar action on Mexico's global scale ratings.

The agency also said it affirmed the global scale ratings on these six insurers.

The outlook revisions include the outlooks on four subsidiaries of global insurance groups – AIG Seguros Mexico, Allianz Mexico Compania de Seguros, AXA Seguros and Sompo Seguros Mexico.

The outlook also was revised on KOT Insurance as it is a captive reinsurer to government-owned Petroleos Mexicanos (Pemex) with sole exposure to the risks in Mexico, S&P said, so KOT Insurance moves in tandem with Mexico's sovereign ratings.

The sixth insurer with an outlook revision was Grupo Nacional Provincial, the agency said.

The negative outlook reflects a view of at least a one-in-three possibility of a downgrade of Mexico’s ratings in the next 24 months if either the government's debt or interest burden deteriorates beyond current expectations, S&P said.

This raises the vulnerability of Mexico's public finances to adverse shocks, the agency explained.

The outlooks of the six insurers were revised because the sovereign ratings limit global scale ratings on these companies, S&P said.

It is highly unlikely that these insurers could withstand a sovereign default given that their investment portfolios have a significant portion of sovereign debt, the agency said.

Therefore, a default of the sovereign will probably impair the insurers' claims payment capacity, S&P said.

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