Rating agencies continue to modify criteria and regulatory developments accelerate, according to Aon Benfield report

MONTE CARLO, Monaco, Sept. 15, 2014 /PRNewswire/ -- Aon Benfield, the global reinsurance intermediary and capital advisor of Aon plc (NYSE:AON), today launches its annual Evolving Criteria report, which reviews the latest rating agency and regulatory developments in the non-life insurance industry.

The report comprises detail on rating agency criteria updates, regulatory developments, accounting developments, financial trends, and enterprise risk management (ERM) trends, and also provides a near-term view of key topics for the industry.

The report notes that the pace of rating agency and regulatory developments is not expected to slow in the near future. Strong ERM seems to be the anchor for companies to address regulatory developments and manage rating agency expectations.

Over the past 12 months, A.M. Best released criteria on capital credit of surplus notes, defined surety company stress tests and introduced a national rating scale process. Additionally, A.M. Best is expected to release an update on its new stochastic capital model by the end of 2014. S&P updates include defining how a company may be rated above its sovereign, and expansion of the S&P Insurance Industry Country Risk Assessment (IICRA) scores. Moody's published a standardized approach to stress testing, and Fitch reintroduced its enhanced stochastic capital model named Prism, for use on EMEA and non-life U.S. insurers.

Meanwhile, regulators are strengthening capital requirements and the emphasis is on more than risk-based capital models. Specifically, own risk solvency assessment (ORSA) is becoming a common framework in the regulatory process.

Patrick Matthews, Head of Global Rating Agency Advisory, said: "The strong financial results of insurance and reinsurance companies globally has not allayed the concerns of the rating agencies, which believe the record levels of capital in the industry coupled with the low interest rate environment, could make it difficult for firms to achieve sustainable, robust results. In addition, exposure to rating agency and regulatory changes is often an underestimated 'event' risk for many companies. Understanding and managing evolving criteria plays an integral component of insurers' success going forward."

The Evolving Criteria report discusses that rating agencies' view of the reinsurance sector has changed dramatically over the past 12 months, with S&P, Moody's, and most recently A.M. Best all revising their respective outlooks from 'stable' to 'negative'.

Meanwhile, insurer and reinsurer underwriting results were shown to have improved, with the median combined ratio expected to reach 94.1 percent by year-end based upon equity analyst estimates. Multiple years of rate increases, especially on property and workers' compensation business, combined with relatively low catastrophe losses so far in 2014 have contributed to strong underwriting results.

The percentage of companies that reported a combined ratio above 100 has significantly decreased from 60 percent in 2011 to only 14 percent in 2013, with 2014 expected to see a slight uptick to 18 percent.

To view the full report, please follow the link below:

http://bit.ly/1pciEhf

About Aon Benfield
Aon Benfield, a division of Aon plc, is the world's leading reinsurance intermediary and full-service capital advisor. We empower our clients to better understand, manage and transfer risk through innovative solutions and personalised access to all forms of global reinsurance capital across treaty, facultative and capital markets. As a trusted advocate, we deliver local reach to the world's markets, an unparalleled investment in innovative analytics, including catastrophe management, actuarial and rating agency advisory. Through our professionals' expertise and experience, we advise clients in making optimal capital choices that will empower results and improve operational effectiveness for their business. With more than 80 offices in 50 countries, our worldwide client base has access to the broadest portfolio of integrated capital solutions and services. To learn how Aon Benfield helps empower results, please visit aonbenfield.com.

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