|[October 28, 2013]
A.M. Best Special Report: Rating Factors for Organizations Using Life Captive Reinsurers
OLDWICK, N.J. --(Business Wire)--
A.M. Best Co. views as positive the life insurance industry's
ongoing discussions related to increased regulatory scrutiny and
transparency of captive reinsurers. In general, A.M. Best believes these
transactions are reasonable mechanisms for companies to proactively
address conservative statutory reserve requirements and achieve some
capital and tax efficiency. As a result, A.M. Best adheres to specific
analytical processes and rating factors that are relevant for life
insurance organizations using captive reinsurers.
For more than a decade, A.M. Best has been monitoring how captive
strategies have evolved and been used after the emergence of Regulation
XXX (XXX) term life and Actuarial Guideline 38 (AG38 or AXXX)
"redundant" reserve requirements. Writers of guaranteed level term or
universal life policies with secondary guarantee have continued to
resort to internal reinsurance, ofte through the use of domestic
captives or offshore entities-typically in Bermuda-to support XXX and
It is important to note that A.M. Best receives proprietary, detailed
financial information on all key reinsurance transactions undertaken by
its population of rated companies. Captive reinsurance transactions are
similar to commercial reinsurance transactions as they must meet the
same regulatory requirements for the ceding company to receive credit
for reinsurance. However, two regulators-one from the insurance
company's state of domicile and the other from the captive's domiciliary
state-review each captive transaction. Currently, more than 30 states
are captive domiciles.
To access a copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=218101&AltSrc=26.
A.M. Best Company is the world's oldest and most authoritative
insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS
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