LONDON--(BUSINESS WIRE)--An A.M. Best analysis of (re)insurers domiciled in the mature markets of the European, Middle East and Africa (EMEA) region under the rating agency’s updated Best’s Credit Rating Methodology (BCRM) and its new building-block approach has revealed that 87.6% of rated companies in this group have Long-Term Issuer Credit Ratings deemed “Excellent” or above.
The Best’s Special Report, titled, “(Re)insurers in Mature EMEA Markets – A Building Block Approach,” also indicates that these EMEA-mature companies, in general, have very robust balance sheets, adequate and strong operating performance, neutral business profiles and utilize appropriate enterprise risk management structures. The updated BCRM was implemented on Oct. 13, 2017, and is a reorganization of the previous methodology, utilizing a building-block approach to provide greater detail and clarity to the Credit Rating (rating) analysis. As a result of this new approach, approximately 3% of A.M. Best’s ratings within the EMEA-mature group were placed under review.
A specific benchmarking analysis on the EMEA-mature group included a combination of large multinational groups, medium-size domestic players, specialist and captive (re)insurance companies. Within the 87.6% of EMEA-mature companies deemed “Excellent”, 11.2% were categorized as “Exceptional & Superior.” Accordingly, 86.6% of all rated EMEA-mature companies have a stable outlook, with the remainder split between negative (4.5%) and positive (2.2%) outlooks.
“The relatively high rating levels and stability in the EMEA-mature group compared with others reflect the maturity of the market, as well as the fact that most rated entities happen to be on average financially stronger, more resilient and better established than the rest of the market,” said Carlos Wong-Fupuy, senior director.
The primary quantitative tool used to evaluate balance sheet strength is Best’s Capital Adequacy Ratio, which helps determine whether a company’s capitalization is appropriate; however, A.M. Best takes all of the balance sheet components into consideration, as the BCAR itself is not the sole determinant of the balance sheet strength assessment.
Along with balance sheet strength, the key pillars A.M. Best uses in its credit analysis are operating performance, business profile and enterprise risk management. According to the report, approximately 53% of the rated population was perceived to have adequate operating performance. Key characteristics of those assessed as adequate include neutral operating trends, which can be equated to underwriting metrics near break-even, as well as historical and prospective operating performance, which are expected to remain neutral.
A.M. Best executives will present the findings of this report, along with an update on the state of the European (re)insurance sector and London Market, on Wednesday, Nov. 15, 2017, at an insurance market briefing, to be held at ETC Venues St. Paul’s in London.
To access a copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=267708.
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