Insurance Ratings – Financial Strength

7th January 2010

When looking for a coverage provider it is important to look at the insurance ratings. These ratings provide a deeper look at the financial strength of the company. The Standard & Poor’s system determines a letter grade for agencies or brokerages.

The following letter grades are possible with the Standard & Poor’s system:

● “AAA”
● “AA”
● “A”
● “BBB”
● “BB”
● “B”
● “CCC”
● “CC”
● “R”
● “NR”

The “AAA” grade is the highest possible grade and shows that the provider who received that grade has “extremely strong” financial security characteristics. “AA” means that the company has “very strong” financial security characteristics. These two insurance ratings are by far the best and companies seeking coverage providers should look for these grades

“A” and “BBB” are the second tier of grades on the grading system. These grades go are “strong” and “good” so the prices for the premiums with these companies may be lower than that of the higher graded providers. Despite a slightly lower premium these companies share the possibility of facing adverse business conditions.

“BB” is the grade where the insurance company may begin having more vulnerabilities than strengths. Although the actual grade still means “marginal” there is exceptionally more possibility of the company’s disadvantages outweighing their advantages. The insurance ratings below “BB” are not likely to meet all of their financial commitments.

If an insurer has a “B” grade then they have “weak” financial security characteristics. A business looking to acquire coverage from a company such as this should be very wary of the situation as things can go awry quickly. There are things that are highly likely to impair this company’s ability to keep up with their financial commitments.

“CCC” and “CC” are rated “very weak” and “extremely weak”. These companies have the lowest possible active grades on the Standard & Poor’s grade system. These providers will be looking for favourable business conditions to exist just to be able to function adequately. There is a huge possibility that these companies will not be able to keep up with their financial commitments. It is very important that these companies work hard to improve their insurance ratings.

An “R” grade means that the provider is under regulatory supervision. This is due to the financial condition of that company. While the supervision is in place, the regulators may be able to focus on one class of their obligations over others without penalty. It is wise to stay away from these providers as there are considered unstable and can lead your business into many vulnerable situations.

An “NR” grade simply means that the coverage provider has not been rated. There are no opinions based about this company’s financial security and nothing is implied by having a “NR” grade. Following any grade there may be a plus or a minus symbol that indicates the growth or decline of the provider within their grading level.

By reviewing these insurance ratings and making your business familiar with the grades you can assess each coverage provider accurately and determine which one offers the best policy along with the least risk.