AM Best sets out cell captive rating requirements

AM Best published an FAQ explaining how it rates cell captive insurers and other alternative risk transfer entities. The Nov. 12 Best's Special Report follows a 2025 revision to its "Rating Captives and Other Alternative Risk Transfer Entities" procedure and maps cell companies inside Best's Credit Rating Methodology, opening a path to assigning Issuer Credit Ratings and Financial Strength Ratings.

AM Best expects cell company sponsors to provide a comprehensive information package: audited financial reports for the cell company and any incorporated cells, key agreements, business plans, licenses and (re)insurance policies. The agency said cell companies have multiple, complex and specialized lines of business, which is why it asks for the fuller file.

Balance-sheet treatment depends on legal form: unincorporated cell companies are only as strong as their weakest cell; incorporated cells are assessed on segregated funds and access to additional funding. Each unincorporated cell must be adequately capitalized, and the analysis weighs the potential for one cell to erode its own capital or the broader company's. Incorporated cells also face stress scenarios and tests of financial flexibility. For a cell used as a sidecar or sponsored facility, the legal form therefore decides which capital the rating leans on.

Jurisdiction and regulatory framework feed the analysis too. AM Best said it may hold discussions with jurisdictional authorities, commission third-party legal reviews and consult external actuaries as cell use grows.