According to the Financial Times, Coface will launch its own ratings service, which it says will avoid the potential conflict of interest inherent in other ratings services, which rely on high fees from the company being rated for much of their revenue.  It intends to use internal information (trade credit performance data – negative and positive), which it collects through its credit insurance business to create the ratings. 

Fees will be paid for either by the company being rated or by any company seeking the information.  Coface will charge £4,000 ($6,100) for a spot rating on a medium-sized company. Coface will hope the new product can help it deal with the worst of the fallout that credit insurers are feeling from the steep increase in companies going bust.   Source: The Financial Times Limited 2008;  Dec. 17 2008

BIIA Comment:  How can Coface avoid a conflict of interest when it will charge the rated company a fee?  It would be interesting to know how the new rating service of Coface stacks up against rating services provided by Fitch, Moody’s and S&P.  According to the FT, Coface will base its ratings on information derived from historical trade credit performance data, while traditional rating agency analysis is largely based on the projected future performance of a business.

BIIA Newsletter November 2008 Issue