How to assess the financial strength of an insurance company


Five independent agencies—A.M. Best, Fitch, Kroll Bond Rating Agency (KBRA), 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, Kroll or S&P is their 5th-highest rating (out of 24 categories for Fitch, 22 categories for Kroll 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.

Ratings Agency Contact Information

All of the ratings agencies can be found on the Web, or reached by phone.

Agency Website Address Phone number
A.M. Best Company, Inc Ambest Rd.
Oldwick, NJ 08858
Fitch Ratings 1 State Street Plaza
New York, NY 10004
Kroll Bond Rating
Agency, Inc. (KBRA) 845 Third Avenue, 8th Fl
New York, NY 10022
Moody’s Investor Services* 99 Church Street
New York, NY 10007
Standard & Poor’s
Insurance Ratings
Services* 55 Water Street
New York, NY 10004

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

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