.png){kind=logo}
AM Best’s comment period on a draft update to its captive insurance-related criteria procedure, “Alternative Risk Transfer (ART),” is coming to a close.
The main proposed update to the criteria procedure, which will be renamed “Rating Captives and Other Alternative Risk Transfer Entities,” establishes a clear approach from AM Best to assigning Financial Strength Ratings and Issuer Credit Ratings to individual incorporated cell entities.
The comment period for market participants in the insurance industry and other interested parties began in December 2024 and will be ending on Feb. 20, 2025. Until that time, the draft update is available on the methodology section of AM Best’s website.
Changes in the draft of the criteria include the following:
· Name and define cell companies and the various cell structures used in the insurance industry.
· Map out how specific factors of unincorporated cell companies and individual incorporated cell entities are viewed within Best’s Credit Rating Methodology (BCRM) and support a path to assigning FSRs and ICRs.
· Set a baseline operational level for individual incorporated cells to be considered for rating assignment.
· Establish that AM Best analytical teams will likely use external parties to aid in the confirmation of a cell entity’s baseline operational and legal capabilities.
· Affirm that the weakest-link approach remains the path to rating unincorporated cell companies.
· Add an appendix supporting data requests of cell companies.
AM Best does not expect the revisions to “Alternative Risk Transfer (ART)” to impact any published ratings.
AM Best also recently held an online briefing to explore the anticipated revisions to the proposed criteria procedure update. During the event, senior analysts provided an overview of AM Best’s approach to rating captives and provided additional information about the proposed changes and rating cell companies under various structures. To view the briefing, please visit AM Best’s Briefing – Captives & Cell Companies: Revisions to ‘Alternative Risk Transfer (ART)’ Criteria.
When submitting comments to the methodology in-box, commenters can select one of the following three options: Allow my comments to be made public and include my contact information; allow my comments to be made public but keep my contact information anonymous; or do not publish my comments (i.e., confidential). Written comments should be submitted no later than Feb. 20, 2025, by e-mail to one of the following email addresses based on your selection:
· To allow your comment to be made public, including your contact information, please email Methodology.Public@ambest.com.
· To allow your comment to be made public, but keep your contact information anonymous, please email Methodology.Anonymous@ambest.com.
· To not publish your contact information or comments and keep all information confidential, please email Methodology.Private@ambest.com.
AM Best is a proud sponsor of VCIA!
