Aon Benfield, the global reinsurance intermediary and capital advisor of Aon plc, today launches its annual Evolving Criteria report, which reviews the latest developments in rating agency protocol in the United States and their impact on the insurance industry.

During a 12-month review period, the report reveals that ratings agencies S&P and A.M. Best released 23 criteria updates with an additional seven updates in draft status. Significant developments included the release of S&P's Insurance Rating Criteria and updates to A.M. Best's BCAR model.

Further notable events included S&P's amendments to its ERM, Management & Governance, and Hybrid Securities evaluation, as well as A.M. Best's analysis of the expiration of TRIPRA – the U.S. federal terrorism backstop – its treatment of Florida Hurricane Catastrophe Fund (FHCF) cover, and its plans to develop a stochastic BCAR model.

The Evolving Criteria study highlights an increase in ratings upgrades across the U.S. P&C insurance sector, outpacing downgrades and reflecting improved market conditions of near record capitalization and favourable levels of profitability.

P&C insurers' aggregate combined ratios improved during the 12-month period decreased from 102 percent to 98 percent.

Patrick Matthews, head of Aon Benfield Rating Agency Americas, said: "Today is an unprecedented time for the U.S. P&C industry, where success can be attained by generating profit in the face of a slowly improving economy, low interest rates, and frequent catastrophic events. It is important that insurers can effectively manage risk at all levels of their enterprises in the face of an increasingly complex risk landscape. Meanwhile, understanding and managing rating agencies' evolving criteria has, and will continue to be an integral component of their success."

The Evolving Criteria report reveals that key insurer concerns include the expiration of TRIPRA in December 2014, and the NAIC ORSA requirement – both an area of focus for ratings agencies.

It highlights the growing importance of enterprise risk management (ERM) for insurers, as rating agencies assess risk management processes across firms' entire organizations rather than in silos.

Mr Matthews added: "Enterprise Risk Management has evolved to become an increasingly complex, yet essential feature in the operation and management of a successful insurance company. The growing sophistication of ERM within the industry has raised the bar for companies to build a risk framework that fits their internal culture and demonstrates that they are constantly managing and mitigating risk effectively throughout the organization."

To view the full Evolving Criteria U.S. report, please click on the link below:

http://thoughtleadership.aonbenfield.com/Documents/201310_evolving_criteria_us.pdf