OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has released the new draft criteria report, “Insurance-Linked Fund Ratings.”
An A.M. Best Insurance-Linked Fund Rating (ILFR) is an opinion on an insurance-linked fund’s (ILF) average credit quality and vulnerability to losses due to 1) credit defaults in a portfolio constituted primarily of insurance-linked assets, and 2) the inability of the fund to fulfill specific and direct contract obligations associated with insurance-linked assets if such obligations exist.
ILFRs are fundamentally different from issue or issuer ratings because funds generally cannot default on obligations, since they essentially have investors who own shares and who can only participate in losses or gains associated with the funds. An ILFR does not guarantee the performance shareholders of the fund should expect and does not make any statements about the net asset value shareholders should expect or the level of fees charged by a fund’s manager.
ILFs can consist of various insurance-linked assets and obligations such as: natural catastrophe bonds, industry loss warranties, extreme mortality bonds, surplus notes, trust-preferred securities, structured settlements (of both the period-certain and life-contingent varieties), ordinary annuities, life settlements, Regulation XXX/AXXX securities, collateralized debt obligations backed by insurance-related risks and other insurance-linked assets, obligations and structured securities.
This new criteria report is not expected to affect existing ratings. The draft of this new criteria report was released for a 30-day public comment period on Sept. 5, 2014. A copy of the criteria report can be found at Criteria Report.
The methodology used in determining ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
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