Moody's Investors Service says a special purpose reinsurer that backs level-premium term life policies may suffer from investment losses.
Moody's, New York, says it has cut the rating on $42.5 million in 30-year Class A-2 fixed rate notes from Orkey Re II P.L.C. to Caa2, from Baa1.
The rating agency also has cut the rating on $30 million in 30-year Class B-1 subordinated floating rate notes from Orkney Re II to C, from Ba3.
A unit of Scottish Re Group Ltd., Hamilton, Bermuda, sponsored Orkney Re II to finance the reserve requirements associated with blocks of business ceded by Scottish Re (U.S.) Inc., another Scottish Re subsidiary.
The reinsurance agreement between Scottish Re (U.S.) and Orkney Re II covers blocks of level-premium term life policies affected by the Regulation Triple X reserve requirements, Moody's says.
"Moody's rating analysis views the actuarial assumptions in Regulation [Triple X] as producing economically redundant statutory reserves for level-premium term products," Moody's says.
