On Monday, August 8, the independent ratings agency Standard and Poor’s announced a rating downgrade of the US. AAA rated insurers to AA+ with a negative outlook. This action was a result of the previous downgrade of the U.S. sovereign debt rating announced on August 5.
Standard and Poor’s policy states that no domestic insurance company can have a higher credit rating than its sovereign. Accordingly, the rating agency downgraded all domestic AAA rated insurance companies—regardless of their individual financial situation—following the downgrade of U.S. sovereign debt.
YoungAssociates always examines in any major gift discussion if there are considerations the donors may wish to consider in order to both provide for both their heirs and charitable organizations. We have developed a number of variations on this basic technique of wealth replacement and utilized AAA life insurance in those efforts, so we were immediately concerned for this unintended consequence of the S&P downgrade.