Best Issues Special Report on Rated Non-U.S. Captives

November 8, 2005

AM. Best Co. has issued a special report focusing on A.M. Best-rated captives domiciled outside the United States. It is a companion to a report on domestic captives, Best issued in August.

According to Best’s findings: “In many ways, captives are inextricably linked to the insurance market cycle, yet the general focus seems to be on the perceived value of captives depending on the existing point in that cycle. While the value of many captives and the commitment of corporations to captives long have been unquestioned and remained unflappable throughout the cycle, the traditional flurry of activity surrounding captives in hard markets and the diminished interest in soft markets undoubtedly will continue.”

Best examines the effect of the insurance cycle on the balance sheets of these captives and whether or not a hardening market has a financial impact on captives.”Though answers to similar questions regarding traditional insurance companies might be readily volunteered, such inquiries have not really been broached for captives, the principal risk carriers of the alternative risk transfer (ART) market,” Best observed. “Indeed, answers to these questions to this day have been and are likely to remain ambiguous.”

Best said it “expects the captive industry to continue to grow despite the softening market,” adding: “Captives and other alternative risk transfer solutions are becoming more accessible and feasible with declining barriers to entry.” Its report also notes that “beyond the fundamental issues of availability and stability of coverage, there are many factors that are making alternatives to traditional commercial insurance more attractive. These include the abundance of expertise, service providers and sophisticated solutions available; competition among domiciles; and rulings from the Internal Revenue Service and legislative changes, which provide guidance and lead to the inclusion of new classes of business, such as employee benefits.”

BestWeek subscribers can download a PDF copy of all full special reports at no additional cost or a combination of the PDF copies plus all related spreadsheet files of the report data at no additional cost from the rating agency’s Website at
Nonsubscribers can download a PDF copy of the full special report (8 pages) for $55 or a combination of the PDF copy plus the spreadsheet file of the report data for $140 from the site.

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