AM Best

AM Best’s Briefing – Captives & Cell Companies: Revisions to ‘Alternative Risk Transfer (ART)’ Criteria

This event has concluded. Playback is available here.

AM Best analytical staff provided a detailed update on the proposed changes to our criteria procedure “Alternative Risk Transfer (ART).”

Renamed “Rating Captives and Other Alternative Risk Transfer Entities,” the criteria procedure included proposed updates that establish a clear approach from AM Best to assigning financial strength ratings (FSRs) and issuer credit ratings (ICRs) to individual incorporated cell entities.

The panel discussed the proposed changes to the criteria, which included:

Named and defined cell companies and the various cell structures used in the insurance industry.
Mapped out how specific factors of unincorporated cell companies and individual incorporated cell entities are viewed within Best’s Credit Rating Methodology (BCRM) and supported a path to assigning Best's Financial Strength Ratings (FSRs) and Best's Issue Credit Ratings (ICRs).
Set a baseline operational level for individual incorporated cells to be considered for rating assignment.
Established that AM Best analytical teams will likely use external parties to aid in the confirmation of a cell entity’s baseline operational and legal capabilities.
Affirmed that the weakest-link approach remains the path to rating unincorporated cell companies.
Added an appendix supporting data requests of cell companies.

AM Best has been covering the ART sector for several decades. Today, we rate approximately 200 captive ventures in multiple jurisdictions. Although a rating on a captive (and other risk retention and cell companies) is comparable to any other rating issued by AM Best, we recognize that captives and ARTs serve special purposes and typically have an operating style that differs from the conventional market.

Moderator

Riccardo Ciccozzi
Director, Market Development - Europe

Panelists

Dr. Mathilde Jakobsen
Senior Director, Analytics (Amsterdam)

Myles Gould
Senior Director, Credit Rating Criteria Research & Analytics (London)