A.M. Best Special Report Offers Rating Perspectives on Premium Growth

OLDWICK, N.J.--(BUSINESS WIRE)-- As insurance markets around the world become progressively more competitive, A.M. Best wants insurers to be mindful that there isn’t necessarily a right way or wrong way to expand and achieve premium growth. A more important consideration is just how well the expansion approach fits within a company’s overall strategy and skill set.

A new Best’s Special Report, titled, “Perspectives on Premium Growth,” underscores the perspective that an A.M. Best analyst would contemplate when assessing a rated company’s source of growth and its related or potential performance within a new or existing segment. A key part of this consideration involves understanding a company’s thought process as it moves forward under a growth initiative.

“In that assessment, there are two areas that are often key topics of discussion,” said John Andre, group vice president. “The first is the view of the market being entered and the impact it might have on the company’s ability to be successful. The second is the strength of the company’s skill set and its ability to properly manage the new risk.”

The report also notes that new business growth in both premiums written and the accompanying loss reserves that exceed the industry norm will result in a surcharge to a company’s Best’s Capital Adequacy Ratio score. Essentially, more capital needs to be held to address the additional execution risk that typically accompanies aggressive growth due to inadequate pricing, insufficient expertise and operating infrastructure.

Another area of discussion within the report pertains to merger and acquisition activity, especially considering how large-scale M&A activity picked up in 2014 amid the continued soft market. A keen level of due diligence is necessary when legal entities are acquired; A.M. Best analysts will walk through the steps taken, particularly in regard to loss reserving. If reserves are guaranteed, the form of the guarantee, the amount and the years covered are among the items discussed.

Other perspectives discussed in the report include consideration of renewal rights transactions, acquiring or maintaining an adequate level of talent, the importance of properly aligning with local producers, as well as cooperation agreements.

To access a complimentary copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=237637.

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 © 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

View source version on businesswire.com: http://www.businesswire.com/news/home/20150602006104/en/

A.M. Best
John Andre, 908-439-2200, ext. 5619
Group Vice President
[email protected]
or
Christopher Sharkey, 908-439-2200, ext. 5159
Manager, Public Relations
[email protected]
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
[email protected]

Source: A.M. Best Company, Inc.

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