Best’s Capital Adequacy Relativity
What Does Best’s Capital Adequacy Relativity Mean?
Best’s Capital Adequacy Relativity (BCAR) is a rating given by an insurance ratings agency. The rating is based on the balance sheets, financial performance, and underwriting activities of the insurance companies under evaluation. While all of these factors play a role in determining a company’s BCAR rating, the balance sheet is given the most emphasis.
Insuranceopedia Explains Best’s Capital Adequacy Relativity
A.M. Best is a ratings agency that focuses on insurance companies. It is recognized in the US and most importantly, the insurance industry as one of the best ratings agencies.
When evaluating an insurance company’s BCAR, A.M. Best pays special attention to that company’s balance sheet. They focus on this because it is the balance sheet that reveals whether the company has enough financial assets to pay for the benefits in the policies it has issued. Specifically, it looks at the policyholder’s surplus, since it can be relied on to pay for future coverage.