In this episode of A.M.BestTV, at the 2018 annual A.M. Best Insurance Market Briefing – Europe in London, Greg Carter, managing director, analytics; Carlos Wong-Fupuy, senior director and Mahesh Mistry, senior director, analytics, discussed the impact of A.M. Best's 2017 rating methodology update. Click on https://www.ambest.com/v.asp?v=bcrmpanel1118 to view the entire program.
Wong-Fupuy summarized the main areas of change that A.M. Best made to its Best’s Credit Rating Methodology (BCRM) and Best’s Capital Adequacy Ratio (BCAR).
“One area was the adoption of a new BCAR model, our proprietary capital model. The other one was trying to allocate, to apportion the effects of different factors into four building blocks, basically, balance sheet strength assessment, operating performance, business profile and enterprise risk management,” said Wong-Fupuy.
Mistry highlighted how only a handful of rated companies from the Europe, Middle East and Africa (EMEA) region were impacted by the updating of BCRM.
“If you consider the portfolio that we operate out of EMEA…we have only had a handful of ratings placed under review as a result of the methodology change,” Mistry said. “So that was about 3% of the portfolio.” He said that of those five companies placed under review, three of them were big global reinsurers that were upgraded and two primary insurers in the Middle East were downgraded as a result of the change in criteria.
Carter said the revised methodology allowed A.M. Best to look at those companies under a different spotlight and to see them in a slightly different way. “That is what led to those rating changes,” he said, adding that companies have reacted very positively to the changes, which were aimed at bringing about greater transparency to the rating process.
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