What do the ratings of the various insurance companies mean?

How do I make sense of all the different insurance company ratings?

Insurance company ratings

There are quite a few organizations that provide rating systems designed to help investors gauge the “financial health” of a company. Essentially, each rating system attempts to quantify the ability of a given company to “handle” its financial obligations.

Those of you who use credit-cards are familiar with the general concept: you apply for a credit card, and based upon your “credit rating,” you get a credit card with a limit based upon an analysis of your credit history.

An insurance company’s rating can be understood in much the same way. If the company has strong ratings from a number of different companies, this means that it is perceived to be able to fulfill its financial obligations.

The U.S. Securities and Exchange Commission (SEC) has a designation for certain of these rating companies; they are called “Nationally Recognized Statistical Rating Organizations (NRSRO’s).

Insurance company ratings

Generally speaking, there are four rating companies you might want to use to check the financial health of the insurance company you are considering investing your money with. In no particular order, they are:

  1. Standard & Poor’s
  2. Moody’s
  3. Fitch Ratings
  4. A.M. Best

Of the four listed, A.M. Best is the only one focused solely on the insurance industry.

Each company has a slightly different “grading scale”, for example A.M. Best might rate a company “A++”, while Standard & Poor’s would rate the same company as “AAA,” but in each case, the ratings mean the same thing (in this example the ratings indicate the best possible credit rating).

Based on these insurance company ratings, if you’re still unsure of which company to invest with, call (239) 985-4097 for assistance.