A.M. Best Announces Changes to its Rating Classifications

 

A.M. Best is changing the “Not Rated” classifications assigned to insurance companies that do not receive a Best’s Credit Rating from A.M. Best Company, effective April 18, 2011. The following announcement on the change was issued on March 24, 2011:

 

A.M. Best rates thousands of insurance companies around the world. However, there are also numerous additional insurers on which A.M. Best publishes financial data, but does not issue any rating opinions. In the past, A.M. Best has classified each of these companies into one of five “Not Rated” classifications (“NR-1” to “NR-5”). The fact that unrated companies were differentiated into these five classifications may have suggested that the data from these companies was being analyzed in a manner similar to that which is applied to companies that receive a Best’s Credit Rating.

Therefore, effective April 18, these categories will be consolidated into one “Not Rated” classification, identified by the two-letter abbreviation “NR.”

A.M. Best is implementing this change for a number of reasons:

• A.M. Best’s global ratings focus requires a broader means of classifying companies’ rating status.

• When we first introduced the different “Not Rated” categories many years ago, our insurance company population was dominated by U.S. companies; the number of insurers that received a classification of “NR-1” through “NR-5” was relatively small. Since then, A.M. Best’s company population has grown to include information from insurers around the globe, with nearly 90% of unrated companies falling into the “NR-5” (Not Formally Followed) category.

• A.M. Best is committed to being inclusive of as many companies throughout the world as possible, regardless of whether or not they have been assigned a Best’s Credit Rating, for the benefit of those who need quality financial information on the global insurance community.

• Having one “NR” classification more clearly communicates that a company is not rated.

• The distinctions between the “NR” designations have become less meaningful as the industry has grown and developed. Having a single “NR” classification makes that designation more straightforward.

• A.M. Best Company publishes value-added financial data on companies regardless of their rating status.

• Also effective April 18, A.M. Best will no longer update the “rating effective” dates for “NR”-designated companies in order to reinforce the fact that there has not been any review as part of a rating assignment process. To make the nature of the process as transparent as possible, the “rating effective” date will now contain the date the company was first assigned an “NR,” reflecting with greater clarity that the company does not receive a Best’s Credit Rating.

• Keep in mind that although A.M. Best does not review “NR” companies’ financial data for the purpose of issuing a Best’s Credit Rating, we do perform extensive validations and cross checks on the data before publishing it. We use this data in our own industry analysis, and it is to A.M. Best’s benefit and the benefit of our subscribers that this financial data is of the highest quality possible.

A.M. Best Company’s purpose in making this change is to provide more meaningful information to our subscribers in a way that is streamlined for maximum usefulness. If you have any questions about this change or have any concerns, please contact Customer Service at (800) 424-2378 or (908) 439-2200, ext. 5742. You can also e-mail your questions to nr_inquiries@ambest.com