How Can I Assess The Financial Strength Of An Insurance Company?

Four independent agencies—A.M. Best, Fitch, Moody’s and Standard & Poor’s—rate the financial strength of insurance companies. Each has its own rating scale, its own rating standards, its own population of rated companies, and its own distribution of companies across its scale. Each agency uses numbers or plusses and minuses to indicate minor variations in rating from another rating class.

The agencies disagree often enough so that you should consider a company’s rating from two or more agencies before judging whether to buy or keep a policy from that company. Moreover, agencies will announce changes of ratings on any day. It’s probably prudent to check annually on the ratings of any company you’re interested in.

Some points for using the ratings:

  • Don’t rely only on what the insurance companies say about their ratings from these agencies. Companies are likely to highlight a higher rating from one agency and ignore a lower one from another agency, or to select the most favorable comments from a rating agency’s report.

  • To use the ratings from more than one independent agency, you need to understand that each agency’s rating code is different from the others. For example, an A+ from A.M. Best is the next-to-top rating of its 15 categories, but an A+ from Fitch or S&P is their 5th-highest rating (out of 24 categories for Fitch, and out of 19 categories for S&P). Moreover, Moody’s doesn’t have an A+ rating.

However, the ratings can be classified into “secure” and “vulnerable” mega-categories. Here, as of August 2009, are the rating scales for each of the “secure” rating classes, and all the “vulnerable” classes combined (source: The Insurance Forum, September 2009 issue).

Ratings Agency Contact Information

Agency

Web site

Address

Phone number

A.M. Best Company, Inc

www.ambest.com

Ambest Road
Oldwick, NJ 08858

908.439.2200

Fitch Ratings

www.fitchibca.com

1 State Street Plaza
New York, NY 10004

800.75.FITCH

Moody’s Investor Services*

www.moodys.com

99 Church Street
New York, NY 10007

212.553.0300

Standard & Poor’s Insurance Ratings Services*

www2.standardandpoors.com

55 Water Street
New York, NY 10004

212.438.2000

The Street.com

www.thestreet.com

 

866.321.8726

 *To use these Web sites, you have to register, but the service is free.

 

 

 

Rate this item
(0 votes)

Careers

If you are interested in a career in the Insurance and Financial industry please submit inquiries or resumes here.

Contact Us

Key Freedom Financial & Insurance Services

21661 Brookhurst Street

Suite 389

Huntington Beach, California 92646

714.350.4095

CA License No. 0I03138