We last reported on Genworth and its River Lake transactions back in July at which time River Lake transactions were being reviewed for credit worthiness. Now Moody’s reports that it has withdrawn all ratings on certain Genworth sponsored and MBIA Insurance Corporation backed life insurance-linked securitizations. River Lake I, II, IV and Rivermont are all Genworth sponsored transactions which have had ratings withdrawn.
The ratings have been withdrawn because of a reduction in the rating of financial guarantor MBIA which places their ratings below investment grade (MBIA is currently rated B3 negative by Moody’s). It’s standard policy for Moody’s to withdraw ratings on transactions where the financial guarantors ratings are too low to ensure it’s ability to pay any resulting claims.
This is yet another example of the impact that the sub-prime mortgage crisis and global economic crisis has had on the insurance securitization market. Unfortunately there could be more to come too, particularly for the life insurance-linked securities area as some transactions utilised companies such as MBIA as guarantors. That was a risky move even without a recession on the horizon and we could see further ratings moves in the coming months.
More details in the Moody’s press release.