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A.M. Best Benchmarking Data Analysis Reveals Minimal Impact from Methodology Changes on U.S. P/C Mutual Sector's Credit RatingsA recently published A.M. Best analysis of the U.S. property/casualty (P/C) mutual sector under the rating agency's revised Best's Credit Rating Methodology (BCRM) and its new building block approach revealed that less 5% of this population's current Credit Ratings (ratings) will be impacted. A.M. Best Senior Managing Director and Chief Rating Officer Stefan Holzberger will update National Association of Mutual Insurance Companies (NAMIC) members on the recent changes to the BCRM and the Best's Capital Adequacy Ratio model at NAMIC's annual convention, and address how these changes may affect property/casualty mutual insurers moving forward. The Best's Special Report, titled "U.S. P/C Mutual Insurers - A Building Block Approach," notes that this result is based upon A.M. Best's preliminary testing, which generated benchmarking statistics, and that none of these companies have been through a formal rating committee process under the new BCRM. Very few actual rating changes are expected to result from A.M. Best's adoption of the updated BCRM, according to the report. The analysis of A.M. Best-rated mutuals using the new building block approach has indicated robust balance sheets, adequate operating performance, limited business profiles and appropriate enterprise risk management structures for th companies. This generalized assessment of trends appears reasonable and in line with expectations based on most mutual companies' operating philosophies to focus on the long-term financial position of the company to benefit the policyholder, as opposed to seeking maximized returns. "Going forward, we feel our new methodology and capital model will provide the market with much greater transparency around the drivers of A.M. Best's rating decisions," Holzberger said. "The so-called 'building block approach' to our credit analysis will hone in on the sources of financial strength or weakness. In addition to providing more clarity on the rating drivers, the enhanced transparency will lead to a more focused bilateral dialogue with our rated clients." The report also states net premium volume for the U.S. P/C mutual grew for the eighth consecutive year, with a moderate pace of 4.2 percent reported for 2016. However, the loss ratio for this sector increased 3 percentage points from the previous year due to harsher weather-related events. Mr. Holzberger will speak on Monday, Sept. 25, from 2:00 p.m. to 3:00 p.m. (MDT) at the 2017 NAMIC conference, to be held September 24-27 at the Colorado Convention Center in Denver, CO. To access a copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=265938 . A.M. Best is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com. Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.
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