After being granted the status of a Nationally Recognized Statistical Rating Organization by the Securities and Exchange Commission last week, A.M. Best Co. intends to penetrate the securitization and banking arenas, while plans to broaden its scope in the insurance industry remain the ratings agency's main goal.
Since 1999, A.M. Best has assigned financial strength ratings to the corporate debt, preferred stock and commercial paper of insurance companies worldwide and has over 600 outstanding ratings on securities issued by 129 insurance and reinsurance companies, according to Larry Mayewski, executive vice president and chief ratings officer at A.M. Best. Now the ratings agency is looking to become more involved in the structured finance market.
"We're hoping that we'll continue to grow in the [structured finance] area over the course of this year and expand into looking at a number of securitizations," Mayewski said. "We are moving slowly but it's an area that is important [for] growth for us and we would expect it to continue to grow as we move through this year and into next year," Mayewski added.
Mayewski said that A.M. Best would have entered the securitization market with or without the NRSRO, but, he noted, it would only help in any capital markets-related rating activity.
"It is our hope that [the NRSRO] gives us some additional opportunities in the securitization market," said Mayewski.
A.M. Best's main focus, however, is to become more active in the insurance marketplace by assigning ratings to additional insurance-oriented securities. Along with this growth, Mayewski said there might be some logical extension into the banking area down the road, since there is a correlation between many banks and insurance companies.
"We're already doing an analysis of the banks that are affiliated with insurance companies," said Mayewski, adding that the question then arises of whether to broaden A.M. Best's ratings into the banking area. "It's a possibility as we look ahead over the medium-term," he said.
Although not currently a primary focus, A.M. Best may also look at rating securities in the hospital marketplace in the future as a logical extension of its healthcare area since it already provides ratings to HMOs and health insurance companies, Mayewski added.
With more than a 100 years of history under its belt, the ratings and information agency is optimistic that the its new status will enable A.M. Best to become a more competitive player within the insurance and related-financial services area.
"As it relates to the insurance activities of Standard & Poor's, Moody's Investors Service and Fitch Ratings, we hope that [the NRSRO] will give us the opportunity to compete on a more even playing ground and increase the competition in that area of their activity," said Mayewski.
Located in Oldwick, N.J., A.M. Best was founded in 1899. In 2000, when the company nearly doubled in size, A.M. Best opened two additional offices, A.M. Best Europe Ltd., in London and A.M. Best Asia-Pacific, headquartered in Hong Kong, stated company information. Moreover, the company employs more than 400 analysts, statisticians and editorial personnel.
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