Best's Review - December 2024 Edition

TIME TO REFLECT

Arthur Snyder III, AM Best chairman, president & CEO, spoke at AM Best’s 31st Annual Review &

Preview Conference in San Antonio, Texas, in March.

Standing the Test of Time: Keys To

Surviving and Thriving in Business

AM Best Company is marking its 125th anniversary on Dec. 14, 2024.

Chairman, President & CEO Arthur Snyder III reflected on the lessons learned

over the company’s long history.

Editor’s Note:

This article was adapted from an

address delivered by AM Best Chairman, President

& CEO Arthur Snyder III at AM Best’s 31st

Annual Review & Preview Conference. For further

information, see the “AM Best Business Trilogy,”

a book series that explores how AM Best and its

founder influenced the creation of the credit rating

industry and its ongoing evolution.

startup business that began in a one-room

office on Liberty Street in lower Manhattan

in 1899 now serves more than 100 countries.

Its ratings, news and research, and data analytics

products, once delivered to customers by hand,

now number in the dozens provided in real time on

online platforms. The company’s founder, Alfred

M. Best, was the inventor of what has become

the largest credit rating agency specializing in the

insurance industry worldwide.

With AM Best Company marking its 125th

anniversary on Dec. 14, 2024, Chairman, President

& CEO Arthur Snyder III reflects on the lessons

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learned over the company’s long history. Snyder

attributes the company’s longevity and success

to five key values: fairness, innovation, focus,

experience and knowledge.

Fairness: The Foundation of Trust

For AM Best, fairness has been paramount since

its inception. Alfred Best left his job at age 19 when

told to “guess” at insurance premium rates, believing

this practice was unfair and contributed to insurance

company failures. He later quit a journalism job

because the publication wouldn’t print negative news

about troubled insurers that advertised with it.

These experiences led Best to found AM Best

Company with a commitment to providing

unbiased, factual reports on insurers’ financial

health. As Snyder notes, “A Best’s Credit

Rating is not a ‘pure opinion.’ It is an ‘opinion’

that is ‘indicative’ of an insurance company’s

creditworthiness.” This opinion is based on

rigorous quantitative and qualitative evaluations

of a company’s financial strength, operating

AM Best: Standing the Test of Time

https://web.ambest.com/information-services/sales-information/the-am-best-business-trilogy

performance, business profile

and risk management.

Snyder advises: “Be

fair. Avoid expressing pure

opinions when making a

decision that affects your

business. In the time allowed,

gather the facts and talk

with ‘subject experts’ before

making a decision.” He

emphasizes striking a balance

between quick decisions and

paralysis by analysis.

Innovation: Adapting to

Change

While AM Best’s core

mission hasn’t changed in

125 years, how it conducts

business has evolved

dramatically. From early

innovations like creating the

first credit ratings in 1905

to adopting mainframe

computers in 1968 and

transitioning to desktop

systems by 2018, the

company has continually

embraced new technologies

and methods.

Snyder recounts how

AM Best’s first mainframe

computer in 1968 revolutionized operations: “We

were able to reduce operating costs and the time

required to create and bring products and services

to market.” He notes that technological innovations

not only remake workflows but can change

organizations fundamentally.

The lesson? “Be innovative. Never dismiss the

possible introduction of innovative products and

services into your business,” Snyder advises. “They

can save time and money. More importantly, they

keep you in touch with employees and customers.”

Focus: Doing One Thing Well

Since 1899, AM Best has maintained a laser

focus on the insurance industry. This unwavering

concentration has allowed the company to develop

deep expertise and build a strong reputation in its

niche.

Snyder shares an example

of this focus in action: After

the 1906 San Francisco

earthquake, Alfred M.

Best worked tirelessly to

analyze the disaster’s impact

on insurers. The resulting

report sold 150,000 copies,

catapulting AM Best to

national recognition.

“Do one thing well. Then

do it over and over,” Snyder

advises. “Remember the old

saying: ‘Love what you do,

and you’ll never work a day

in your life.’ Those who love

what they do usually find

themselves hard at work

doing what they do best all

the time.”

Experience: Learning

From Mistakes

Mistakes and challenges

have been valuable teachers

for AM Best over the years.

Snyder emphasizes the

importance of viewing errors

as “teachable moments” and

opportunities for growth.

He shares how the

company refined its rating

system after the failure of Illinois Life Insurance

Co. during the Great Depression. At that time,

the founder’s son, A. Dexter Best, wrote: In the

future, increases of book value will not take effect

in the company’s rating system in the current

year but only in the following year. “This gets

around the difficulty from our point of view that

we have eventually to recognize such increases if

the insurance department recognizes them, but of

course if a company is hard-pressed, this business of

delaying it one year will prevent it from interfering

with the proper operation of our rating system.”

Snyder’s advice: “Never let a good mistake go

to waste. People make mistakes. Businesses are

like people; they make mistakes, too. When your

business makes a mistake, you can choose to learn

from it or ignore it. Businesses that learn from

mistakes are more successful than those that don’t.”

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“Do one thing well. Then do

it over and over. Remember

the old saying: ‘Love what

you do, and you’ll never

work a day in your life.’

Those who love what they

do usually find themselves

hard at work doing what

they do best all the time.”

Arthur Snyder III

AM Best

Knowledge: The Power of Collective

Wisdom

For AM Best, knowledge isn’t concentrated in a

single individual but distributed throughout the entire

organization. Snyder recalls the words of his father,

Arthur Snyder Jr., who said: “The AM Best Company

is only a name. It can demand no allegiance. It is no

better, or no worse, than the people who come together

each day to carry out their individual assignments. It is

their collective effort, working together, which creates

the bond of allegiance—not to the AM Best Company,

but to each other.”

This philosophy emphasizes the importance

of teamwork and knowledge-sharing. Snyder

advises: “For a company to survive and thrive, it

needs employees who share their knowledge. Good

teamwork among a company’s employees is what

makes a good company. You can’t have one without

the other.”

Conclusion: The Ingredients for Longevity

Reflecting on AM Best’s 125-year journey, Snyder

credits the five core values—fairness, innovation,

focus, experience and knowledge—as key to the

company’s ability to stand the test of time. He

notes that these values foster critical attributes in

employees:

•Fairness fosters integrity

•Innovation and focus foster ingenuity

•Experience and knowledge foster insight

“Integrity, ingenuity and insight are the essential

ingredients you want in your employees to survive

and thrive in our ever-changing world,” Snyder said.

As businesses face an uncertain economic future,

with growing national debt and potential financial

crises looming, the lessons from AM Best’s long

history offer valuable guidance. By embracing

fairness, continually innovating, maintaining focus,

learning from experience, and fostering collective

knowledge, companies can build the resilience

needed to weather challenges and thrive over the

long term.

The company’s founder, Alfred M. Best, said: “I

have only one thought in operating my business,

and that is to tell the truth about the companies—I

and all my associates, who are truly imbued with

that spirit.” This commitment to integrity and truth-

telling has been the bedrock of AM Best’s success

for over a century, offering a timeless principle for

businesses in any industry to emulate.

KEEP UP WITH FAST-PACED DEVELOPMENTS

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Stay informed with the latest real-time news, research and thought leadership from AM Best.

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AM Best: Standing the Test of Time

23.BNRS07BVC1

https://www.ambest.com/promos/bnrsbr/index.html

CRUCIAL

POINT

REFERENCE

Best’s Financial Strength Ratings • Best’s Issuer Credit Ratings • Best’s Issue Credit Ratings

Best’s Rating Evaluation Service • Best’s Rating Assessment Service • Best’s Preliminary Credit Assessment

Best’s Performance Assessment for Delegated Underwriting Authority Enterprises

CELEBRATING

125

YEARS

23.MK157B

https://web.ambest.com/home

KEEPING THE PEN

Louisiana Commissioner of Insurance Tim Temple, left, shown speaking at the 2024 Summer

National Meeting of the National Association of Insurance Commissioners, said regulations that recently took eect in

his state gave Louisiana greater oversight of the relationship between insurers and managing general agents.

For Some Insolvent Insurance Carriers,

‘Giving Away the Pen’ to MGAs May

Have Contributed to Their Undoing

Allowing managing general agents with specialized expertise too much

authority won’t necessarily solve insurers’ problems, some analysts believe.

by Anthony Bellano

hile catastrophe losses continue to be the

leading cause for insurer insolvencies, a

number of insurers ran into trouble after

Anthony Bellano

is an associate editor. He can be reached at

anthony.bellano@ambest.com.

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relying too heavily on delegated underwriting

authority enterprises.

From 2000 to 2022, the third-leading cause

of impairments was due to affiliated programs,

according to

Rapidly Increasing MGA Premiums

Warrant Greater Oversight

, a Best’s Market Segment

Photo courtesy of the NAIC

Insolvencies

mailto:anthony.bellano@ambest.com

“The acts of the MGA are perceived as

the acts of the insurance company. It all

gets put on the insurance company at

the end of the day as far as what takes

place and what happens.”

Dawn Walker

AM Best

Report that provides an analysis of the U.S.

property/casualty market during that time period.

Giving affiliates authority over the underwriting

of accounts or policies is common practice. When

properly managed, these partners can bring

valuable expertise, especially in niche markets,

and help insurers quickly scale their operations

upward, according to AM Best Associate Director

Dawn Walker.

But there are plenty of things that can go wrong,

resulting in an insurer’s insolvency. It can happen

when a new, thinly capitalized insurer is trying to

ramp up business too quickly; when the interests

of the insurer and the managing general agent

don’t necessarily line up; or when an insurer doesn’t

conduct due diligence in selecting an affiliate

partner, she said.

“In some cases, the insurer may give too much

authority to an affiliated managing general agent

without implementing effective risk management

controls or oversight,” Walker said. “This can lead

to the underwriting of unprofitable business in

exchange for short-term gains.”

In Louisiana, regulations that went into effect

US P/C Industry – Specific Causes of

Impairments, 2000-2022

Cause

Number of

Impairments

Catastrophe Losses34

Fraud - Adjudged or Alleged25

Affiliate Programs22

Rapid Growth16

Investment Losses11

Reinsurance Failure1

Unlicensed Insurance Product1

Total110

Source: AM Best data and research, from

Rapidly Increasing MGA

Premiums Warrant Greater Oversight

, published May 22, 2024.

over the summer gave the state’s department of

insurance greater oversight of the relationship

between insurers and MGAs. The new law also bars

certain officers, directors and other executives from

insurance companies that became insolvent from

acting as MGAs in the state.

“The Legislature gave us additional authority.

We’re using that where we can to make sure these

structures are set up right; that they have the right

management in place; and that their intent is to

come in and provide an affordable product at an

affordable price,” Louisiana Commissioner of

Insurance Tim Temple said. “I feel comfortable that

the legislation we passed is going to improve the

Louisiana market to the benefit of the consumer.”

Some of the 13 insurers AM Best looked at in

its report started writing business in catastrophe-

prone areas at a time when weather wasn’t an issue,

only to be blindsided when natural catastrophes

occurred. Temple said reinsurance had become

an issue for many Louisiana insurers that found

themselves insolvent.

The Issues

When utilized correctly, affiliated and nonaffiliated

programs offer specialized underwriting and risk

management services, which can contribute positively

to the growth of both the MGA and the insurer,

Walker said. But it’s not a perfect system, analysts say.

“Problems can arise when an insurer that is only

meeting minimal capitalization levels may also have

an overly aggressive growth strategy and chooses to

partner with an MGA on underwriting business,

maybe even in catastrophe-prone areas,” Walker said.

She described a scenario in which newer, smaller,

or regional insurers that are looking at where they

can grow turn to insurers of last resort. It may be

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