Our revised sovereign rating methodology (newly applied this year) places greater weight on a sovereign's own monetary flexibility, even when that country largely uses the currency of a larger sovereign. We consider monetary flexibility and gaps in official data as credit weaknesses for Bermuda. We are therefore lowering our long-term sovereign rating on Bermuda to 'AA-' from 'AA', and affirming our 'A-1+' short-term rating on the government. The ratings continue to be supported by Bermuda's comparative advantages in the reinsurance sector, its political stability, its prosperity, and its strong government balance sheet. The stable outlook reflects the balance of risks between Bermuda's fiscal flexibility and its external vulnerabilities--—most notably to potential changes in U.S. law affecting the offshore reinsurance industry--and
