A.M. Best Co. is requesting comments from market participants in the insurance industry and other interested parties on the new draft criteria report, "Evaluating U.S. Surplus Notes."

U.S. surplus notes (surplus notes) are unsecured indentures that may be issued directly by insurance operating companies domiciled in the United States. Surplus notes are closely regulated and deeply subordinated to policyholder claims, and therefore are reported as part of policyholders' surplus despite their debt-like features. The new draft report, "Evaluating U.S. Surplus Notes," has been created to improve the transparency of A.M. Best's approach to analyzing surplus notes. The draft report consolidates into a single document the approach to determining the equity and debt characteristics of surplus notes, the treatment afforded to surplus notes in Best's Capital Adequacy Ratio (BCAR), the treatment of surplus notes in A.M. Best's financial leverage calculations, and A.M. Best's approach to rating surplus notes issued by insurance companies. Visit www.ambest.com/ratings/methodology to download a PDF copy of the draft report.

This new criteria report is part of A.M. Best's continual review of its rating methodology and is not expected to affect existing ratings. Written comments should be submitted by email to rating.methodology@ambest.com no later than Feb. 20, 2014. The details of any comments received may be made public unless specifically requested to be kept confidential.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

A.M. Best Company
Duncan McColl, CFA, 908-439-2200, ext. 5826
Assistant Vice President, Rating Criteria
duncan.mccoll@ambest.com
or
George Hansen, FSA, MAAA, 908-439-2200, ext. 5469
Life & Health Actuary, Rating Criteria
george.hansen@ambest.com
or
Rachelle Morrow, 908-439-2200, ext. 5445
Senior Manager, Public Relations
rachelle.morrow@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com