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'Significant' OIL exodus sparks review


NEW YORK--Standard & Poor's Corp. on Monday placed its A- financial strength rating for energy mutual Oil Insurance Ltd. under review with negative implications.

S&P said the move stems from Hamilton, Bermuda-based OIL's announcement last week that 12 shareholder members are withdrawing from the structure, and one member will be ineligible for membership, effective June 1.

That announcement followed the departure of nine OIL shareholder members in January. The mutual's shareholder base currently stands at 61 (BI, April 23).

"In Standard & Poor's opinion, the number of shareholders who have exited OIL in the past six months is significant. This raises concerns about the stability of the company's membership base and the strength of its competitive position in its chosen niches," the New York-based rating agency said in a statement.

"In the past year, OIL has made significant efforts to address the different needs of its membership base, which contributed to the company announcing an amended rating and premium plan that was approved by the shareholders in March," S&P said. "The combination of the recent exits and the amended rating and premium plan could lead to changes in the prospective volatility of OIL's insured portfolio that need to be evaluated."

S&P's current credit watch on OIL is expected to be resolved within three months. "In the event that following its review Standard & Poor's decides to lower the ratings on OIL, such a downgrade is not expected to exceed one notch," the agency said.