Because they underwrite policies differently, perpetual insurers will be analyzed differently than traditional insurers, according A.M Best. The firm’s methodology change, detailed in its “Analyzing Perpetual Insurers” criteria report is not expected to affect ratings and is reflected in the most recent version of “Best’s Credit Rating Methodology (BCRM).”

Perpetual insurers use a policy deposit approach to underwriting, in which the insured makes a single fully-refundable payment for coverage that has no expiration date. The deposit is a multiple of an average one-year term policy; the proceeds of which are then invested in securities to produce a revenue source to cover losses and expenses. The insured has the opportunity to cancel coverage at any time and would then receive a refund, without interest, for the entire deposit.

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