AM Best

AM Best Releases New Criteria Procedure: Scoring and Assessing Innovation and Revised Best’s Credit Rating Methodology


Edin Imsirovic
Associate Director – P/C
+1 908 439 2200, ext. 5740

Maura McGuigan
Director, Credit Rating Criteria,
Research & Analytics
+1 908 439 2200, ext. 5317

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644


OLDWICK - MARCH 05, 2020 12:10 PM (EST)
AM Best has released its new criteria procedure, “Scoring and Assessing Innovation,” as well as a revised Best’s Credit Rating Methodology (BCRM). Both are effective immediately.

AM Best published its first request for comment related to the innovation criteria on March 14, 2019. Subsequently, AM Best published an additional request for comment related to the innovation criteria and an initial request for comment for the revised BCRM on Sept. 13, 2019.

In the final criteria procedure, “Scoring and Assessing Innovation,” AM Best refined language in the criteria to increase transparency further in light of industry feedback and to reflect ongoing internal review and analysis.

Significant changes to the criteria procedure since the release of the draft on March 14, 2019, include the following:

  • The innovation score and assessment descriptor will not be published at the time the criteria procedure is implemented, as was indicated in the initial draft;

  • Innovation assessment descriptors were revised to convey more accurately an insurer’s innovation abilities;

  • Clarification of leadership versus culture was provided to delineate more clearly the elements that will be considered in the assessment of these two components; and

  • The description of the relationship between a company’s enterprise mission statement and innovation was revised to clarify that there is no expectation for companies to change their enterprise mission statement to incorporate innovation explicitly.

AM Best defines innovation as a multistage process whereby an organization transforms ideas into new or significantly improved products, processes, services or business models that have a measurable positive impact over time and enable the organization to remain relevant and successful. These products, processes, services or business models can be created organically or adopted from external sources.

AM Best’s evaluation of a company’s innovation level will be based on two elements: (1) innovation inputs — the components of a company’s innovation process; and (2) innovation outputs — the impact of the company’s innovation efforts. The resulting innovation score is the sum of these two evaluations.

Historically, AM Best has captured innovation indirectly through the various building blocks of its Credit Rating (rating) process. The revised BCRM incorporates innovation as the ninth subcomponent of the business profile building block. Within its business profile building block, AM Best explicitly will consider whether a company’s innovation efforts, or lack thereof, have had a demonstrable positive or negative impact on its long-term financial strength.

Innovation always has been important for the success of an insurance company, but with the increased pace of change in society, climate and technology, it is becoming increasingly critical to the long-term success of all insurers. While AM Best believes that the pace of innovation in the insurance industry is accelerating and that an insurer’s ability to innovate is becoming an increasingly important indicator of a company’s long-term financial strength, AM Best does not expect any immediate changes to any company ratings as a result of the publication of these criteria procedures.

AM Best is publishing 42 comments related to the innovation criteria, which were received during the two public consultation periods through the methodology in-box; no comments were received specifically related to the revised BCRM. AM Best would like to thank all the respondents who participated in the consultation periods. The results of the comment periods are published here.

These criteria procedures are available at .

Please see the March 5, 2020, “AM Best Request for Comment Period Response: Scoring and Assessing Innovation and BCRM” for a discussion on comments received during the request for comment periods. To access the full copy of this response document, please click here.

A video discussion on this subject with Stephen Irwin, managing director, Credit Rating Criteria, Research and Analytics, is available at .

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.