In an effort to improve transparency surrounding its rating system, Standard & Poor’s has decided to submit its new appraisal criteria to a consultation of the insurance business market. This new approach will target insurers outside the United States. The agency also intends to add to its considerations for the components of insurers’ situations the results outlooks up to two years, or mention the capital adequacy target ratio. Due consideration will also be given to the evaluation of operational risks pertaining to the insurer’s environment (competitive position, political risk, state of the industry), the insurer’s financial risk profile (profit forecasts, shareholder’s equity status, financial flexibility etc…), the impact of global exposure and risk management (ERM) and management capacity in comparison with competitors. The company will proceed to three tests on the insurer’s capacity to cover expenses, on liquidity status and on sovereign ratings. Supports from the group’s member companies will also be analyzed.
