Printer Friendly

A.M. BEST RELEASES SPECIAL REPORT ON RBC DEVELOPMENTS, IMPLICATIONS

 OLDWICK, N.J., Nov. 29 /PRNewswire/ -- The A.M. Best Company today released a comprehensive risk-based capital special report, the second of three reports, updating its perspective of RBC standards and their effects on the insurance industry, companies' strategic plans and Best's Ratings. In addition, the report highlights significant and fundamental differences between the NAIC's RBC model used for solvency purposes and Best's proprietary capital model, which is an integral part of its rating process.
 In October, the National Association of Insurance Commissioners released its formula draft of the emerging Property/Casualty RBC model. This report contained subtle but dramatic changes to a report drafted in June, which had cast many large commercial carriers in a negative light. This revised formula was sharply criticized by the insurance industry and other interested parties at a public hearing last week in Kansas City, MO, and has heightened the controversy surrounding the development and implementation of RBC standards for the property/casualty industry.
 Following discussions held at the public hearing, a number of compromises within the RBC formula were adopted by the property/casualty working group which considerably tempers an insurer's required capital, particularly for large commercial carriers which had been heavily penalized by the October formula draft. A.M. Best believes the October draft, revised for the latest changes, will be adopted by regulators at the NAIC's winter meeting next month.
 "The impact of RBC will extend well beyond the regulatory arena and will affect insurance sales and growth, asset allocation and investment management, capital raising, corporate structures, `flight to quality' and consolidation trends in the property/casualty insurance industry," according to Eric M. Simpson, vice president of Best's property/casualty division and co-author of the study. He added, "The implementation of RBC standards will affect insurance companies' strategic plans differently according to their relative capital position."
 While A.M. Best supports RBC and improved capitalization standards, "there still remains some concern that companies' RBC results will be misinterpreted and misrepresented," Mr. Simpson continued. "We hope that users of RBC will recognize the limitations of its simplistic approach."
 A.M. Best said it will monitor a company's RBC results, but will not use them within its rating evaluation, which is based on a full complement of quantitative and qualitative considerations, including its proprietary capital model. Best's comprehensive rating evaluation reflects its knowledge and understanding of the risk characteristics and future business plans unique to each insurer's operations.
 Copies of the report are available by calling 908-439-2200, ext. 5684.
 -0- 11/29/93
 /CONTACT: Rhonda J. Ruch of A.M. Best Company, 908-439-2200, ext. 5684/


CO: A.M. Best Company ST: New Jersey IN: INS SU:

WB -- NY061 -- 8319 11/29/93 13:08 EST
COPYRIGHT 1993 PR Newswire Association LLC
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:PR Newswire
Date:Nov 29, 1993
Words:452
Previous Article:OREGON'S $30 MILLION GENERAL OBLIGATION BONDS RATED 'AA' BY FITCH -- FITCH FINANCIAL WIRE --
Next Article:PENNSYLVANIA GAS AND WATER COMPANY ANNOUNCES REDEMPTION OF PREFERRED STOCK
Topics:

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters