The ratings agencies.
Hard on the heels of their failure to notice even the most egregious deficiencies in the management of the nation's finance companies, with glowing ratings published almost up to the day of receivership, we have the remarkable example of AMI.
This from the company website. Note well the date the rating was issued.
Insurance ratingsAMI Insurance Limited has an A.M. Best Company Inc. rating of A- (Excellent) effective 23 March, 2011.
For those who don't know, this rating of A- Excellent is the highest possible rating which can be given to a moderate sized company. So you can see, the good people from A.M.Best came in and did their due diligence, failed to notice the absence of adequate reinsurance, failed to notice the unhealthy concentration of risk and failed to notice the inadequacy of premium income. They just issued a 'top of the wozza' certification to a dog of a company and pocketed their fat fee. Of course the purpose of the rating is to convince an unknowing public that all is well.
Now fast forward to a company with which Adolf has considerable close experience.
Fidelity Life ------ A.M. Best rating A- Excellent
AMI is a fire and general company while Fidelity is a life and investment company. The difference between the two is chalk and cheese. Fidelity has a board of directors with both broad business and specialist life insurance experience. The company is replete with reinsurance cover on all risks and in my experience operates actuarially an extremely conservative strategy. (I'm sure they regularly 'war game' an unprecedented disaster where say 150,000 people, including all Fidelity's HO staff, are killed on one day in the Auckland CBD and Fidelity's own HQ is flattened. Who will keep the business running and where s all the money to come from?)
I'd say CEO Milton Jennings must be wondering where he can go to get a more reliable ratings agency. He might well ask the good people from A.M.Best why he should pay them good money for a junk rating certificate which tells his clients that Fidelity Life is no better managed than AMI.
Then there are some questions for the Insurance Council which, a couple of days ago, piously declared that AMI was operating within ALL the prudential limits set by the Council.
Well what a bloody waste of space is the Insurance Council.