AM Best Requests Comments on Proposed Revisions to ‘Alternative Risk Transfer (ART)’ Criteria

AM Best is requesting comments from market participants in the insurance industry and other interested parties on a draft update to its criteria procedure, “Alternative Risk Transfer (ART),” which is available on the methodology section of AM Best’s website until Feb. 20, 2025.

The main proposed update to “Alternative Risk Transfer (ART)” (to be renamed “Rating Captives and Other Alternative Risk Transfer Entities”) establishes a clear approach from AM Best to assigning Financial Strength Ratings (FSRs) and Issuer Credit Ratings (ICRs) to individual incorporated cell entities.

Changes in the draft of the criteria include the following:

• Name and define cell companies and the various cell structures used in the insurance industry
• Map out how specific factors of unincorporated cell companies and individual incorporated cell entities are viewed within Best’s Credit Rating Methodology (BCRM) and support a path to assigning FSRs and ICRs.
• Set a baseline operational level for individual incorporated cells to be considered for rating assignment
• Establish 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
• Affirm that the weakest-link approach remains the path to rating unincorporated cell companies
• Add an appendix supporting data requests of cell companies

AM Best does not expect the revisions to “Alternative Risk Transfer (ART)” to impact any published ratings.

This draft criteria is available at https://web.ambest.com/ratings-services/rating-methodologies.

When submitting comments to the methodology in-box, commenters can select one of the following three options: Allow my comments to be made public and include my contact information; allow my comments to be made public but keep my contact information anonymous; or do not publish my comments (i.e., confidential). Written comments should be submitted no later than Feb. 20, 2025, by e-mail to one of the following email addresses based on your selection:

• To allow your comment to be made public, including your contact information, please email Methodology.Public@ambest.com.
• To allow your comment to be made public, but keep your contact information anonymous, please email Methodology.Anonymous@ambest.com.
• To not publish your contact information or comments and keep all information confidential, please email Methodology.Private@ambest.com.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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