Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

A.M. Best publishes new re/insurance transformer rating criteria


Insurance and reinsurance rating agency A.M. Best has now published the final version of its insurance-linked securities (ILS) market focused criteria report titled “Rating Reinsurance/Insurance Transformer Vehicles.”

A draft version of the report was published at the beginning of August, as we wrote at the time, with a 30 day consultation period available for any market participants who wanted to comment, question or contribute to the thinking behind this criteria.

No comments or feedback at all were forthcoming, according to A.M. Best, which we hope suggests that the document was aligned with market expectations from the draft, rather than that the market failed to engage or provide feedback. As a result no changes were made and the criteria report has been published as is.

The criteria report describes A.M. Best’s rating approach and considerations unique to the evaluation of transformer reinsurance vehicles and the process by which the transformer vehicles act as an intermediary to transfer insurance risks to various counterparties (i.e., reinsurance and non-insurance entities).

The criteria generally applies to the rating of insurance and reinsurance entities that are licensed or designated as special purpose insurers/vehicles in various regulatory jurisdictions with a primary purpose to assume and cede insurance exposures funded by various capital-market instruments.

Given the importance of the transformer vehicle to the ILS and catastrophe bond market, participants in the market should ensure they understand the rating criteria, which is available on the A.M. Best website here in PDF format.

Register today for ILS Asia 2023, our next insurance-linked securities (ILS) market conference. Held in Singapore, July 13th, 2023.

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