AM Best has released its revised criteria procedure “Rating Captives and Other Alternative Risk Transfer Entities,” (formerly known as “Alternative Risk Transfer”) which is effective immediately.

AM Best initiated a Call for Comment (CFC) related to this criteria procedure on Dec. 2, 2024 and the comment period closed on Feb. 20, 2025.

In the final version of the revised criteria procedure, AM Best establishes a path to assigning Issuer Credit Ratings (ICR) and Financial Strength Ratings (FSR) to individual incorporated cell entities. Additional changes include: renaming the criteria procedure; updating nomenclature for cell companies and the various cell structures used in the insurance industry; affirming that the weakest link approach remains the path to rating unincorporated cell companies; setting baseline operational and legal foundational requirements for cell entities; adding detail to support acceptable Letter of Credit conditions; and other minor editorial revisions to provide clarity to this criteria.

The revisions to this criteria procedure will not result in a change to any currently published Best’s Credit Ratings.

During the CFC period, AM Best did not receive any written comments (public, private, or anonymous) from market participants in the insurance industry or any other interested parties on the proposed revisions to the criteria procedure. Consequently, no changes have been made to the final version of the criteria procedure as a result of the CFC. The Response to Comment document is published here: https://web.ambest.com/rating-methodologies/comments.

The updated criteria procedure is available at www.ambest.com/ratings/methodology.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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