A.M. Best Updates Property/Casualty Supplemental Rating Questionnaire

A.M. Best Co. has updated its 2011 statement year "Property/Casualty Supplemental Rating Questionnaire" (SRQ) in several key areas. The areas affected include: Fixed Income Portfolio Analysis, Aging of Uncollected Premiums, Price Monitoring, Natural Catastrophe Probable Maximum Loss (PML), Natural Catastrophe Deterministic Loss Estimates and Financial Projections.

The new fixed income question will provide greater insight into the quality of the fixed income portfolio. The new aging of uncollected premiums question will show any large concentrations with a single entity in addition to the aging of those uncollected premium balances. The price monitoring question was revised to request an additional year of information, and the financial projections question was revised to request income statement items in greater detail. A request for the rating unit's consolidated surplus was added to help reduce the amount of manual input into the SRQ for those questions that request a ratio to surplus. This press release will allow sufficient time for companies to compile and provide the new requested information.

A.M. Best continues to put a high degree of emphasis on an organization's overall catastrophe management and the impact on its financial strength. The modifications to the natural catastrophe PML section will provide a greater understanding of the rating unit's exposures to natural catastrophes as well as management's view of those exposures. Insurers are now being asked to provide PMLs on an aggregate season basis in addition to PMLs on a per occurrence basis. The request for peak time PMLs has been removed. A new question about the sensitivity of the assumptions used to generate the PMLs has been added. For those companies who use multiple catastrophe models as part of their risk management, the SRQ requests the output from each model separately. All insurers are requested to provide their view of their catastrophe risk regardless of how many models they use, since their view of risk may be different than the model output. All catastrophe loss estimates are expected to be based on the rating unit's worldwide exposures. For those companies that perform deterministic loss scenario analyses for natural catastrophes, a new question was added that requests the loss estimates from those analyses. A.M. Best will continue to use random time per occurrence PMLs as the basis of its Best's Capital Adequacy Ratio analyses.

A copy of the new and revised property/casualty questions can be accessed at http://www.ambest.com/ratings/methodology.asp. Founded in 1899, 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 © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.