AM Best proposes revisions to rating system

AM Best has proposed revisions to its core credit rating methodology, Best’s Credit Rating Methodology (BCRM). Concurrently, the firm has released proposed revisions for the criteria procedure for the US property/casualty (P/C) Best’s Capital Adequacy Ratio (BCAR).  AM Best is requesting comments from all interested parties on these draft documents, which are currently available in the methodology section of the rating firm’s website.  Written comments should be submitted to the firm no later than June 30, 2016. The details of any comments received may be made public unless specifically requested to be kept confidential.  Implementation of the new credit rating methodology and BCAR models is expected in the first quarter of 2017. This new release of the BCRM is a reorganisation of the current methodology, providing a road map with greater detail, clarity and transparency to the rating analysis.  The BCRM offers a forum for discussion with analytical staff and also will promote greater consistency in the rating process. While the methodology is being updated, the core components of the analytical process – a review of balance sheet strength, operating performance, business profile and enterprise risk management – remain the key pillars of the analysis and thus do not represent a fundamental change to the rating analysis. The proposed BCAR criteria procedure update applies to US P/C companies. All companies that are evaluated using the US P/C BCAR model will receive their new BCAR output based on 2014 data. Company management is encouraged to review the BCAR output in conjunction with the criteria procedure and the BCRM. Later this year, AM Best will release proposed revisions to criteria procedures for the BCAR models covering US life/health, Canadian, title and all other non-US insurers. At that time, a second comment period for the BCRM will occur. AM Best executives will review these changes in two online webinar presentations set for Friday, March 18, 2016, at 11 am EDT for the BCRM presentation, and Monday, March 21, at 11 am EDT for the BCAR presentation.