In response to recent market commentary, A.M. Best Co. has issued a statement, which emphasizes that there “has been no change to the treatment of trust funds that support reinsurance recoverables in its capital model. The treatment continues to be a 90 percent offset to the risk charge related to the reinsurance recoverables that are supported by an acceptable trust fund.”
Best also noted: “In some instances, as is the case with recoverables from authorized reinsurers that are not overdue, the existence of the collateral is not available from the financial statement used in the analysis. In those cases, it would benefit the insurer to ensure that credit for the collateral is included in the evaluation of capital. In most cases though, the relief provided from the collateral has a minimal impact on Best’s Capital Adequacy Ratio. Only companies who are heavily dependent on reinsurance would obtain a noticeable benefit in its capital score.”
Topics Reinsurance
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