AM Best now rates DUAE’s
AM Best has released a new methodology, Best’s Performance Assessment for Delegated Underwriting Authority Enterprises.
In this methodology, AM Best introduces the Best’s Performance Assessment, which provides a framework for differentiating among delegated underwriting authority enterprises (DUAEs) in the insurance industry.
The global credit rating agency said Best’s PA was a forward-looking, independent and objective non-credit opinion indicative of a DUAE’s relative ability to perform services on behalf of its insurance partners.
AM Best defines DUAEs as a blanket term to capture managing general agents (MGAs), managing general underwriters, coverholders, programme administrators, programme underwriters, underwriting agencies, direct authorisations and appointed representatives.
A managing agent of a syndicate could delegate its authority to a coverholder to enter into contracts of insurance on behalf of the syndicate.
AM Best believes that there are key assessment factors that are indicative of a DUAE’s relative ability to perform services on behalf of its insurance partners.
A best spokesman said: “This performance assessment has been a huge topic of discussion in the industry since we released our draft methodology last March.
“Here’s why: It’s the first of its kind.
“This performance assessment provides the insurance industry with its first objective, independent opinion of a DUAE’s ability to perform services on behalf of carriers.
“DUAEs have grown in number and influence in recent years, and they play an increasingly large role in generating premium for carriers.
“But until now, the industry has had no tool for benchmarking or differentiating among them.
”Best’s performance assessment will help bring transparency to that market and will benefit both carriers and DUAEs.
“Carriers can use the performance assessment to help inform their decision on which DUAEs to partner with. DUAEs can use the performance assessment to distinguish themselves from their competitors.”
The PA, as outlined in the methodology, includes an in-depth assessment of the following key components: underwriting capabilities, governance and internal controls, financial condition, organisational talent, and depth and breadth of relationships.
The PA is an aggregation of the sub-assessment assigned to each component. The methodology details the information that will be necessary for AM Best to evaluate the aforementioned key assessment components.
President and CEO of AM Best Rating Services, Matthew Mosher commented: “AM Best believes that DUAEs are an increasingly important part of the insurance ecosystem, with a higher proportion of insurance revenue being generated through DUAEs in many global regions.”
He said: “The presence and significance of DUAEs continue to rise and their decisions could financially impact their insurance partners.
“Assessing DUAEs will provide transparency to the market and will inform the industry of a DUAE’s ability to perform services on behalf of its insurance partners.”