Best Requests Comments on Draft Criteria: Rating Reinsurance Pools

May 22, 2013

A.M. Best Co. is requesting comments from market participants in the insurance industry and other interested parties on the draft criteria report, “Rating Reinsurance Pools.”

Best explained that it “defines a reinsurance pool as any entity, agent or contractual agreement, which provides a mechanism for collective acceptance and sharing, equal or otherwise, of the insurance risk between its members. The members are the ultimate guarantors of the pool, assuming all liabilities arising from the pooling arrangements.

“The motives for establishing reinsurance pools are varied. In some markets, the limited availability of adequate reinsurance protection, particularly for high value, natural catastrophe and terrorism risks, has given rise to national and regional reinsurance pools. In addition, insurance companies in emerging markets may lack the expertise and capacity to underwrite and retain these risks. There also is a growing interest in the use of national and regional reinsurance pools to provide capital in the event of a major catastrophe and limit to a certain degree the adverse impact that governments may have post disaster in the absence of insurance cover.

“This draft criteria report describes the key considerations specific to reinsurance pools and includes a discussion of how these distinctive features are treated in a rating evaluation. Moreover, given that the capital structure of reinsurance pools can vary greatly, particular attention is given to the assessment of capital adequacy. Reinsurance pools generally have similar characteristics to a reinsurer and thus, this criteria report should be read in conjunction with A.M. Best’s main insurance methodology, Best’s Credit Rating Methodology.”

A draft copy of the report is available.

Written comments should be submitted by email to rating.methodology@ambest.com by June 21, 2013.

Source: A.M. Best

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