Oldwick, N.J.-based A.M. Best Co. has released an update to its rating methodology for insurance companies which are subsidiaries. Titled “Rating Members of Insurance Groups,” the document explains how A.M. Best evaluates and assigns ratings to insurance entities housed within a group structure.

“The starting point for every rating is the stand-alone evaluation of the legal entity’s balance sheet strength, operating performance and business profile,” the document states.

Also of great importance is the subsidiary’s relation to its parent or holding company.

“One of the main themes is the implicit and explicit support a parent company provides to its insurance subsidiaries,” it states. “These factors, together with any legal constraints on the free-flow of capital between affiliates, will determine an insurance subsidiary’s rating enhancement or drag and ultimate rating assignment.”

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