AXIS Capital Holdings Ltd. and PartnerRe Ltd’s plan to merge in a massive $11 billion deal is drawing a cautious response from insurance ratings agencies and analysts.

Standard & Poor’s said on Jan. 26 that it has placed all of its ratings on both companies and their subsidiaries on CreditWatch with negative implications. That move comes, in part from anticipation of complications ahead, assuming both companies merge as planned later this year.

“There are uncertainties around how the combined entity will manage its capital adequacy and efficiencies, property catastrophe exposure, and potential business overlap and the resulting attrition,” Standard & Poor’s credit analyst Taoufik Gharib said in prepared remarks.

“More importantly,” Gharib said, “it is not clear how the enterprise risk management programs will be integrated rapidly and efficiently and how the new risk tolerances will be defined.”

At the same time, Gharib said, these risks will be at least partly countered “by the familiarity between both companies’ management teams.”

Similarly A.M. Best said it has placed the financial strength ratings of both companies and their subsidiaries under review with negative implications.

“The under review status reflects A.M. Best’s concern associated with the merger’s size, scope and complexity,” A.M. Best said. “Along with combining two company cultures under one leadership team, the successful integration will need to be completed in a timely manner and optimize operational and systems infrastructure while retaining key personnel.”

A.M. Best said there is “greater inherent risk” to the ongoing operations of the combined company “during the integration period.”

At the same time, A.M. Best said, the companies have “the collaborative nature of both management teams,” and a “fundamentally strong strategic rational” for the deal in their favor.

“This combination brings two strong companies together that will have enhanced scale, a more diversified product mix and the transaction offers the ability to generate meaningful capital efficiencies and synergies,” A.M. Best sad.

Specifically the financial strength rating of A+ is under review for AXIS Re SE, AXIS Reinsurance Company, AXIS Specialty Europe SE, AXIS Surplus Insurance Company and AXIS Insurance Company. For PartnerRe, the financial strength rating of A+ is under review for Partner Reinsurance Company of the U.S., PartnerRe Insurance Company of New York, PartnerRe Ireland Insurance Ltd., Partner Reinsurance Europe SE, and PartnerRe America Insurance Company.

A.M. Best said the under review status for both companies will be removed after the merger is complete and it can scrutinize “the final integration plan.”

Sources: Standard & Poor’s, A.M. Best