A.M. Best Methodology Report: Rating Protected Cell Companies.
The use of protected cell company captive insurers as a viable alternative risk-transfer mechanism continues to grow in popularity and utility. The PCC is a highly complex and flexible structure that can be utilized in a great variety of ways by multiple users and sponsors. Managers, participants and owners of protected cell company captives use a highly flexible tool to address narrowly focused self-insurance needs. Achieving a reliable and consistent financial strength rating has become increasingly imperative as these entities react to intensified demands for accountability, transparency and proof of value added.
Evaluating the financial strength of a protected cell or protected cell company requires a clear understanding of the program's ability to handle the exposures of its sponsoring organization. The rating methodology also clarifies that there are some significant differences between rating a protected cell and rating a PCC organization in totality. Financial flexibility and the adequacy of the PC's capital relative to the risks assumed are the critical factors in this analysis. Other important considerations include the type of protected cell that is employed, whether open, closed or some variation in between; the contractual relationships among the cells in the program and between them and the core; and the ability of each cell to absorb shock losses or adverse development.
For more information on A.M. Best's rating methodologies or to download a copy of this methodology report, visit www.ambest.com/ratings/methodology.html.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.
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|Date:||Mar 5, 2008|
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