AM Best Invites Feedback on New Criteria Update
AM Best is turning its focus to the insurance industry, seeking valuable input from market participants regarding updates to its criteria process titled "Alternative Risk Transfer (ART)." This draft is accessible on AM Best’s website and remains open for comments until a specified future date.
Understanding the Proposed Changes
A significant element of the proposed revision for ART, which will be renamed as "Rating Captives and Other Alternative Risk Transfer Entities," introduces a structured method for AM Best to allocate Financial Strength Ratings (FSRs) and Issuer Credit Ratings (ICRs) to individual incorporated cell entities.
Key Revisions in the Draft
The draft presents various essential changes aimed at refining the evaluation of alternative risk transfer mechanisms, which include:
- Defining different types of cell companies and their various structures employed within the insurance domain.
- Clarifying how distinct factors concerning unincorporated cell companies and single incorporated cell entities are interpreted through Best’s Credit Rating Methodology (BCRM) and establishing a route to assign FSRs and ICRs effectively.
- Setting a foundational operational level necessary for individual incorporated cells to be eligible for rating assignments.
- Stating that AM Best's analytical teams might collaborate with third parties to verify a cell entity’s fundamental operational and legal capacities.
- Reaffirming that the weakest-link approach persists as the method for rating unincorporated cell companies.
- Including an appendix that supports data requests for cell companies.
Implications of the Draft Criteria
AM Best anticipates that the alterations within the ART criteria are not expected to affect any existing ratings that have been published. This reassurance is a significant aspect as companies align their operational practices with new standards.
Submission of Comments
Market participants interested in expressing their opinions on the draft criteria have various options on how to submit their comments. With these choices, they can opt to make their feedback public along with their contact details, allow comments to be public while keeping their contact information anonymous, or choose to submit comments confidentially.
Available Options for Comment Submission
To participate in this feedback process, interested parties can send their written responses via email up until the specified deadline and can select from the following options:
- For public comments inclusive of contact information, submit your input to Methodology.Public@ambest.com.
- If privacy is a concern but feedback is still to be made public, send to Methodology.Anonymous@ambest.com.
- For confidential comments, address your feedback to Methodology.Private@ambest.com.
About AM Best
AM Best operates globally as a credit rating agency, news publisher, and data analytics provider, specifically focused on the insurance sector. With its headquarters in the United States, AM Best maintains a presence in over 100 nations, including offices in key cities worldwide.
Frequently Asked Questions
1. What is the purpose of the revised ART criteria?
The updated ART criteria aim to clarify how ratings are assigned to alternative risk entities, enhancing the transparency of the process.
2. Who can provide comments on the proposed revisions?
Market participants within the insurance sector and other interested parties are encouraged to share their insights.
3. When is the deadline for submitting comments?
Comments must be submitted before the deadline specified in the announcement.
4. How will AM Best use the feedback received?
The feedback may influence final adjustments to the criteria before implementation, ensuring alignment with industry expectations.
5. Where can I find more information about AM Best?
Further details about AM Best's services and criteria can be accessed through their official website.
