A.M. Best Special Report: Rating Methodology for Captive Insurance Companies.OLDWICK, N.J. -- The alternative risk transfer market continues to grow as a vital factor in the insurance sector. It already comprises a large portion of the global commercial lines market. As the number of participants and the risk-bearing capacity of the alternative market have grown, so has a wide array of infrastructure support entities tailored to its needs. These include underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. and claims-management services, accounting and legal firms, and brokers with units focused on alternative market management services. In addition, a number of traditional insurers and reinsurers have organized dedicated departments to cater to the needs of captive insurers. These include fronting companies; divisions offering risk-management services; and administrators of group captive programs. There also appears to be a trend toward captive-management services being performed by professional management firms established specifically to address the needs of the ART market. Managers, participants and owners of captive insurers now face rapidly changing financial and business conditions and rising visibility within parent organizations. Achieving a reliable and consistent financial strength rating has become increasingly imperative as these entities react to intensified in·ten·si·fy v. in·ten·si·fied, in·ten·si·fy·ing, in·ten·si·fies v.tr. 1. To make intense or more intense: demands for accountability, transparency (1) The quality of being able to see through a material. The terms transparency and translucency are often used synonymously; however, transparent would technically mean "seeing through clear glass," while translucent would mean "seeing through frosted glass." See alpha blending. and proof of value added Value Added The enhancement a company gives its product or service before offering the product to customers. Notes: This can either increase the products price or value. . Each of these organizations and their insureds, as well as regulatory authorities Noun 1. regulatory authority - a governmental agency that regulates businesses in the public interest regulatory agency administrative body, administrative unit - a unit with administrative responsibilities and numerous other interested parties, require a consistent means to determine the security and operational viability of the risk-transfer vehicles. Through a diligent dil·i·gent adj. Marked by persevering, painstaking effort. See Synonyms at busy. [Middle English, from Old French, from Latin d application of tested analytical tools and processes, Best's Ratings Best's rating A rating A.M. Best Co. assigns to insurance companies based on the company's ability to meet its obligations to its policyholders. achieve a level of consistency that ensures credibility and comparability. With a financial strength rating, the captive carries Captive carry refers to a flight by a mothership (carrier aircraft) and spaceplane, rocket, or missile paired together in a parasite aircraft configuration. The two are not separated in flight, as would occur during an air launch. its own recognized standing in the business world. A.M. Best has more than a 105-year history of being the premier provider of financial information and ratings for the insurance industry. Relying on this experience, the rating evaluation process has evolved into a thoroughly tested one that incorporates the in-depth analysis of company-specific quantitative and qualitative factors and industry dynamics as achieved through ongoing, interactive discussions with senior management of the rated organization. For more information on A.M. Best's rating methodologies or to download a copy of this full methodology report, visit www.ambest.com/ratings/methodology.html. 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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