There are several financial services companies that provide ratings of U.S. insurance companies. The four major rating companies include:
A.M. Best Company (website: www.ambest.com)
Fitch Ratings (website: www.fitchratings.com)
Moody's Investors Services (website: www.moodys.com)
Standard & Poor's Corporation (website: www.standardandpoors.com)
And one of the most widely known rating service companies that reviews start-up insurance companies, or insurance companies with less than five years of historical operating experience is:
DemoTech (website: www.demotech.com)
Please Note: These are independent insurance company rating organizations. Their appearance on the department’s website is not an endorsement by the Department of Financial Services for any of the organizations. The listing is meant for the convenience of the department’s consumers when selecting an insurance company.
Each of the rating service companies have developed a rating system that uses one or more letters of the alphabet to describe an insurer's financial condition. The ratings generally are shown as A++ (being the best) to D or E. The factors taken into consideration include company earnings, the company’s financial reserves compared to the total value of the outstanding risks, the ratio of the companies fixed costs to the company’s variable costs, the availability of liquid assets of the company, the performance of the company’s investments, reinsurance programs, and the management’s ability, integrity and experience.
While the companies use similar data to calculate their ratings, no two systems are alike. Rating service companies develop their own criteria for rating insurance companies. Some rating service companies may only rate insurance companies who have five or more years of financial data, or who have a higher volume of policies. Since the rating companies develop their own rating criteria, an insurance company's rating may be different between rating service companies.
It is important to remember that an insurance company’s ratings reflect their financial ability to pay claims. The ratings are not a measure of the quality of the company’s claim handling services. Because the rating systems vary, and the classifications used by rating firms are broad, it's a good idea to consider ratings from several sources when evaluating an insurer.