OLDWICK, N.J.–(BUSINESS WIRE)–In this AMBestTV episode, Timothy Prince, director of analytics, AM Best, said Solvency II ratios typically focus on one-year projections, while Best’s Capital Adequacy Ratio (BCAR) considers a longer time horizon. Click on http://www.ambest.com/v.asp?v=ratios819 to view the entire program.
Prince discussed a new Best’s Special Report that compared the output from the two models, focusing on AM Best-rated European insurers. The report notes there has been only limited opportunity to observe trends as it is relatively early in the application of Solvency II and AM Best’s updated BCAR model, with only two years of data available. Still, Prince highlighted the similarities and differences between the two models.
“Looking at year-end 2017, AM Best’s research showed that broadly speaking, companies with stronger Solvency II ratios also typically have stronger BCAR ratios. There were very few companies where that was not true,” said Prince. “As for the differences, since these are two different data sources, under Solvency II, companies file specific regulatory returns, while under the BCAR model, AM Best uses a company’s IFRS or GAAP financial statement. Within the two independent models, there are also differences in definitions of how things are classified and that might influence which risk bucket a company would fall under within each model.”
To access a copy of this special report, titled, “AM Best Compares BCAR Model Output With Solvency II Capital Requirements,” visit http://www3.ambest.com/bestweek/purchase.asp?record_code=288335.
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