A.M. Best Offers New Analytical Model

July 3, 2001

A.M. Best Co. announced the introduction of a new analytical model that offers a common standard for worldwide insurance companies to assess and manage risk and capital demands.

The A.M. Best Enterprise Risk Model, formed with Seabury Insurance Capital LLC, acting as an advisory firm specializing in the insurance and financial services industry, provides a specialized view of an insurance enterprise’s financial risk and offers insurers a systematic and scientific approach to manage it.

Worlwide, a number of insurance organizations are participating in the beta test of Best’s ERM. After the test period, A.M. Best will start to phase the model into its rating process. Both the enterprise risk model and Best’s Capital Adequacy Ratio (BCAR), aid analysts in understanding how well a company’s asset, underwriting and business risks are helped along by its level of capital.

Best’s ERM is centered on value-at-risk (VaR) concepts that are widely used by commercial banks, investment banks and asset management companies.

Through financial services diversification and convergence, A.M. Best is expecting that the move towards VaR analysis by insurers will increase, and sees the integration of new analytics as critical to maintaining the integrity of its insurer financial strength rating thinking.

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