A.M. Best Clarifies Trust Fund Treatment.OLDWICK, N.J. -- In response to recent market commentary, A.M. Best Co. would like to emphasize that there has been no change to the treatment of trust funds that support reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. recoverables in its capital model. The treatment continues to be a 90% offset to the risk charge related to the reinsurance recoverables that are supported by an acceptable trust fund. In some instances, as is the case with recoverables from authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: reinsurers that are not overdue OVERDUE. A bill, note, bond or other contract, for the payment of money at a particular day, when not paid upon the day, is overdue. 2. The indorsement of a note or bill overdue, is equivalent to drawing a new bill payable at sight. 2 Conn. 419; 18 Pick. , the existence of the collateral is not available from the financial statement used in the analysis. In those cases, it would benefit the insurer An individual or company who, through a contractual agreement, undertakes to compensate specified losses, liability, or damages incurred by another individual. An insurer is frequently an insurance company and is also known as an underwriter. to ensure that credit for the collateral is included in the evaluation of capital. In most cases though, the relief provided from the collateral has a minimal impact on Best's Capital Adequacy Ratio Capital adequacy ratio (CAR), also called Capital to Risk (Weighted) Assets Ratio (CRAR)[], is a ratio of a bank's capital to its risk. National regulators track a bank's CAR to ensure that it can absorb a reasonable amount of loss. . Only companies who are heavily dependent on reinsurance would obtain a noticeable benefit in its capital score. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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