Standard & Poor’s new capital adequacy model will play a significant role in the assessment of the capital strength of Canadian life and health insurance companies, according to a report published on Wednesday, June 26.

S&P says the model produces a capital adequacy ratio that compares a company’s total adjusted capital with a base level of total adjusted capital considered appropriate to support total risk at a secure rating level.

“The capital adequacy ratio is only a starting point for judging capital adequacy,” says Standard & Poor’s credit analyst Donald Chu. “Analysts play a critical role in adjusting the model to best assess risks that are unique to a company while maintaining the standards of comparability between companies.”

The report, “New Capital Adequacy Model Announced for Canadian Life and Health Insurance Market,” supplements the published body of Standard & Poor’s criteria on the insurance sector.

The full report is available on RatingsDirect, Standard & Poor’s online research database, at www.ratingsdirect.com. It also can be found at www.standardandpoors.com/Forum under Ratings Commentary/Insurance/Life.