Best's Insurance-Linked Securities & Structures Methodology (BILSM)
The BILSM provides an outline and summarization of the methodology AM Best utilizes to rate insurance-linked securities and insurance-linked structures (ILS). This methodology offers readers insight into information requirements, key rating considerations, risk modeling and surveillance activities that are generally applied by AM Best to rate ILS transactions. Best's Idealized Issue Default Matrix and Best's Idealized Issuer Default Matrix are included within the BILSM.
In some cases, ILS transactions are rated using structured finance technology by considering the credit profile or risk characteristics of the assets, liabilities, triggers or legal structure that affects the payment of interest and principal to investors. These transactions would be evaluated using this methodology, along with the supplemental ILS Transaction criteria procedures listed below.
In other cases, ILS transactions that have the "look and feel" of an insurance company are rated based on a set of methods that may also include structured finance technology, and while less emphasis may be placed on certain factors such as financial flexibility and/or business profile, these types of transactions will be evaluated based on Best's Credit Rating Methodology (BCRM), and its supplemental criteria procedures.
The BILSM and supplemental criteria procedures are available as pdf documents below.
Best's Insurance-Linked Securities & Structures Methodology (BILSM)
- Best's Insurance-Linked Securities & Structures Methodology September 14, 2023
- Related Criteria Procedures