Rating agencies in public brawl over scores for private credit

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In the United States, two credit rating agencies insurance agencies have been involved in a rare public dispute over the reliability of the score for the growing stash of private creditors investment.

This dispute involves a survey, since it has been withdrawn by its publisher, the small credit rating agencies that allocate to find a more generous score in private credit than the larger and more established individuals. The Krol Bond rating agency has complained of the fitch rating to confuse market participants depending on the research to raise doubts about its rating.

Fitch On Monday, the National Association of Insurance issued a report on the Creol and other groups based on the 2021 survey issued by the Commissioners.

A Fitch spokesman stood by his report, arguing that the insurance commissioner group reached the same conclusion in previous research. “If (Association) provides new information we will update our analysis.”

Abnormally overroit Congress highlights the fiercely growing and profitable $ 1.6TN’s acute competition Private credit The industry is the industry to create turf – not just among the ND -payers, but also in groups given for referee’s credit interests for market opaque investment offers.

Former Senior Senior Moody’s analyst and now the Rating Agency Credit Specram chief executive Ann Rootlez said, “In the insurance industry and possible, there is an enhancement of risk in the loan sector, which is not properly monitored.” “Both opaque and risk are responsible for the fact that the current SEC-controlled credit rating has cracks on the basis of the industry.”

Insurance and other investors use the type of rating on the question known as a private letter rating if no public rating is available. Greater rating agencies have been dominated by small agencies in the market by issuing this type of score for private credit products.

Private letter investment “was inherently more risky due to lack of transparency and potential rating inflation,” JP Morgan’s analysts said in a recent note, “The process, analysis or information is not transparent from outside, there are underlying challenges to determine the quality of credit from the outside”.

Creole was the first to challenge the company’s credit agencies after the global financial crisis, saying it was difficult to see the “statistically constant” research “of the larger rival. It says that Fitch’s criticism is moving towards supporting its own possession for domination.

“In search of relevance to increasing its market share in private credit, Fitch seems to have two basic principles for any rating agency – honesty and analytical hardness,” Croll said in a statement.

The research by the NAIC focuses on the rise of private letter ratings for the insurer’s private creditors, which is about $ 350 billion at the end of 2021.

It has been found that the secretly issued grades from small rating shops were more likely to deviate from the score by the Association’s own Security Assessment Office and the average was significantly higher. Accordingly Original reportSmall groups like Croll showed the tendency to give three notch ratings than the internal score of the association, while greater agencies like Fitch provide about two notch ratings.

The survey also found that the number of rated securities conducted by US insurers increased from 8,152 to 2,850 to 2023 in 2019, and in 2023, the sequel to the small credit-rating rated by Egan-Jones, Croll and Morningstar increased by 86 percent.

The report also noted that Fitch is the top supplier of the private letter rating between the Big Three US rating agencies before the S&P global rating and mood rating.

However, at the beginning of this month, the insurance association Declaration It was removing the report from his website “to do more editorial” to clarify the analysis.

Without naming, the insurance association says it “will evaluate” the information we provide to the public can be used in misconceptions or otherwise inappropriate ways. “

NAIC has rejected a request for commenting.