Rating agencies have taken giant leaps forward over the past year, with new models transporting their firms to planets once nearly uninhabited by domestic property-casualty insurers–the worlds of enterprise risk management and dynamic financial models.
While only a brave few U.S. p-c insurers have taken on the challenge of stepping into these alien territories over the past decade, analysts at Fitch and Standard & Poor's now even speak in new languages, using terms like risk tolerances and confidence intervals in every conversation they have with insurers they rate.
Last year, S&P announced it would add an ERM component to its rating analysis, alongside existing rating categories like competitive position, operational analysis, investments and capitalization. Since last fall, when the New York-based firm became the first insurance rating agency to incorporate ERM into its ratings, S&P has completed 78 ERM analyses for North American and European insurers.
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