The recent revisions that A.M. Best made to its Best’s Credit Rating Methodology (BCRM) and Best’s Capital Adequacy Ratio (BCAR) resulted in changes for just 3% of re/insurers in the Europe, Middle East & Africa (EMEA) region, according to analysts at the company.
Speaking in an interview with A.M. BestTV, Mahesh Mistry, Senior Director, Analytics, explained that, of the five companies placed under review as a result of the changes, three were big global reinsurers that were upgraded, while two primary insurers in the Middle East were downgraded.
“We wouldn’t have expected significant changes in ratings in the methodology because that would have suggested that either the old methodology was incorrect or the new one is incorrect,” explained Greg Carter, Managing Director, Analytics.
“So, it’s not surprising that there are a few changes,” he continued. “What the revised methodology allowed us to do was to look at those companies under a different spotlight and to see them in a slightly different way, and that’s what led to those rating changes.”
Carlos Wong-Fupuy, Senior Director at A.M. Best, said that the key changes to the methodology consisted of adopting of the BCAR model and focusing on the core factors such as balance sheet strength assessment, operating performance, business profile and enterprise risk management.
“I think that there has been a recognition that things have changed, companies are adopting more sophisticated methods in assessing their capital,” Wong-Fupuy told A.M. BestTV.
“We also needed to add some more transparency to the way we explain the rating drivers and be more specific about the way companies are adopting enterprise risk management,” he added.
