Ratings agency Standard & Poor’s (S&P) plans to change the methodology it uses to rate insurance companies.

The proposed changes will affect how S&P rates insurers worldwide across life, health, general insurance and reinsurance, and are being introduced to increase transparency of its criteria.

The changes will apply to long-term issuer credit, financial strength and financial enhancement ratings.

But S&P says it expects the impact of the changes to be “modest”.

“The review may lead to adjustments to some insurance company ratings,” the agency said in a statement. “We expect the significant majority of ratings to remain unchanged or move by no more than one notch.”

S&P says its new approach will feature two key steps: assessing a company’s group credit profile and, for certain subsidiaries, their stand-alone credit profile; and then considering extraordinary government or group support.

The framework will comprise a business risk profile and a financial risk profile.

S&P says the aim is to “clearly and in considerable detail specify the factors and sub-factors of the analysis, and to show how they combine into rating outcomes”.

It says the new criteria will also allow the agency to provide more forward-looking opinions.

Submissions commenting on the proposed changes outlined in the paper are due by September 9.

S&P reviewed its ratings criteria for the global banking sector last year.