Incorporating lessons learned from historical periods for industry stress, including the near-failure of American International Group, Standard & Poor’s published a revised rating methodology for insurance companies on Tuesday.

Executive Summary

New factors that S&P analysts will use to rate insurers going forward would have caught some of the problems that caused insurer insolvencies and near-failures, but as ratings are published under the new criteria over the next three months, positive actions are the most likely.

The criteria introduce new components to capture items like industrywide pricing declines, country risks, risk concentrations, and prospective capital changes.

In addition, the publication gives a clear window into the process that analysts use to put all the individual pieces of their rating methodology together, Rodney Clark, managing director of S&P’s Insurance Ratings, told Carrier Management during an April interview in advance of Tuesday’s release.

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