NEW YORK—Standard & Poor's Corp. said Friday that it has placed its long-term counterparty-credit and financial-strength ratings and related issue ratings on all AAA-rated U.S. insurance groups on review with negative implications because of their significant holdings of U.S. Treasury and agency securities.

S&P recently placed the AAA long-term and A-1+ short-term sovereign credit ratings on the United States of America on CreditWatch with negative implications due to fears it would default if lawmakers and the White House cannot agree on a plan to raise the nation's debt ceiling.

The AAA-rated insurance groups affected by the move are:

• Knights of Columbus,

• New York Life Insurance Co.,

• Northwestern Mutual Life Insurance Co.,

• Teachers Insurance & Annuity Assn. of America,

• United Services Automobile Assn. and

• Goldman Sachs Mitsui Marine Derivative Products L.P., which offers over-the-counter derivative products.

“In addition, we placed the AA ratings on $5.75 billion of surplus notes issued by three of the affected insurers on CreditWatch,” S&P said in a statement. The short-term ratings of the companies remain unchanged, it said.

S&P said the five AAA-rated insurance groups—excluding GSMMDP—operate in the United States and have significant holdings of U.S. Treasury and agency securities.

Default risk small

“Investments in Treasury and agency securities represented 60% to 200% of total adjusted capital for each of the five groups at year-end 2010,” S&P said. “However, in the unexpected event of a U.S. default, we would expect these insurers' losses, if any, to be modest and manageable relative to capital.”

“We still believe that the risk of a payment default on U.S. government debt obligations as a result of not raising the debt ceiling is small, though increasing,” S&P said in the statement. “However, any default on scheduled debt service payments on the U.S.' market debt, however brief, could lead us to revise the long-term and short-term ratings on the U.S. to SD.”

Under S&P’s rating definitions, SD—or selective default—refers to a situation where an issuer, “the federal government in this case, has defaulted on some of its debt obligations, while remaining current on its other debt obligations.”