Insurance ratings agency A.M. Best has put SAC Capital Advisors' reinsurance arm on watch in the wake of criminal insider-trading charges against the hedge fund.
A.M. Best said that SAC Re was on review with negative implications, saying it wished to review an updated business plan—one that would say who would manage the reinsurer's assets should SAC itself be put out of business. SAC Re invests its assets and premiums with SAC Capital.
"Presently, there is uncertainty as to whether the invested assets can be managed by SAC Capital as well as whether there will be ramifications concerning any affiliation with SAC Capital on the reinsurance franchise going forward," A.M. Best said. "Rating downgrades could occur if SAC Re cannot separate itself from reputational risk, the business plan is not executed over the long term or key management is not retained."
SAC Re, which SAC launched a year ago, currently has an A-minus rating. The company is not technically a subsidiary or division of SAC, but is at risk because it shares a name with the troubled hedge fund, A.M. Best said.