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Credit rating agencies increase importance of enterprise risk management: Aon

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Credit rating agencies increase importance of enterprise risk management: Aon

Credit rating agencies have increased the importance of enterprise risk management in their rating frameworks, according to a report released Monday by Aon P.L.C.

The report, “Looking Back To Anticipate Change Moving Forward,” said major ratings firms have refined and expanded their rating methodology in reaction to increased pressure for transparency the U.S. Securities and Exchange Commission has put on rating criteria and processes.

Throughout the past year, rating agencies have released more than 25 criteria updates, most commonly focusing on nonpublic data, according to the report.

“Across the multitude of rating agency methodology proposals and updates over the past year, we see a general move towards a requirement for ever more detailed financial analyses that include a greater volume of nonpublic data, with the aim of creating global consistency in terms of methodology application, as well as an increase in the overall transparency of the ratings process,” Kelly Superczynski, head of global rating agency advisory at Aon Benfield, said in a statement accompanying the report.

New York-based Standard & Poor's Corp.'s proposed rating criteria framework has elevated the importance of ERM for a company's risk profile, which can influence the rating, Aon said in the report.

A.M. Best Co. has increased the importance of ERM by adding an ERM section to their annual supplemental ratings questionnaire. The Oldwick, N.J.-based ratings firm also added a risk management section to its rating reports.

“Rating agencies and regulators continue to increase the importance and growing expectations of risk management for companies of all size and complexity,” Ms. Superczynski said in the statement.

To access the full report, click here.