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Frequently Asked Questions

Financial Stability Ratings® (FSRs)

What is a Financial Stability Rating® (FSR)?

An FSR summarizes Demotech, Inc.’s opinion as to the financial stability of a risk-bearing entity. It is assigned after an extensive process of financial analysis. FSRs are primarily based upon an insurer’s financial information and also consider certain qualitative information.

Where can I find definitions of each Financial Stability Rating® (FSR)?

The definitions of FSRs can be accessed by clicking here.  Also, when viewing a company’s information page, simply click on the FSR Seal and you will be linked to the definition of that FSR.

How current is a company’s Financial Stability Rating® (FSR)?

Only current and accurate FSRs are posted on our website. These FSRs reflect ongoing review and analysis of up to date company information. Due to reporting, submission and processing lags, the posted financial information is not necessarily reflective of the information used in our analysis.

To whom does Demotech assign Financial Stability Ratings® (FSRs)?

Generally, Demotech provides Preliminary Financial Stability Ratings® (PFSR) to nearly all Property & Casualty insurers and Title underwriters that file annual and quarterly statements with the National Association of Insurance Commissioners (NAIC). Demotech presents the insurers with their PFSR. Insurers are provided an opportunity to finalize the PFSR by engaging in our rating process and submitting any required additional information. The FSRs on our website are displayed only for those companies that choose to finalize their rating. The company information listed on our website, which is presented for all companies, is public information.

What is the process to finalize a Financial Stability Rating® (FSR)?

Demotech will obtain and review certain information about the insurance company.  Our Preliminary Data Request requirements vary based on a number of factors, including the type of insurance company (e.g. P&C, Title underwriter, risk retention group, public entity insurance pool, etc.) and years in business (e.g. newly capitalized insurer or established insurer). In addition to evaluating established insurers, Demotech has an established and proven process to evaluate newly capitalized insurance companies.

Typical information reviewed by Demotech for an established insurer may include:

  • Quarterly and annual statutory financial statements
  • Management discussion and analysis
  • Statement of actuarial opinion
  • Actuarial opinion summary
  • Audit report
  • Reinsurance information

Typical information reviewed by Demotech for a newly capitalized insurer may include:

  • Biographical information on principals, key employees or service providers
  • Administrative agreements with principals and third parties
  • Job descriptions or summaries of the duties of key personnel
  • Pro forma financial statements and business plans submitted to the State of domicile
  • Proposed underwriting guidelines and application
  • Initial rate, rule and form filings and underlying information
  • Claims department procedures and practices manual
  • Investment guidelines
  • Reinsurance information
  • Proposed marketing and sales materials
  • Producer contracts including commission structure and contingency commission criteria
  • Catastrophe modeling report and analysis of base rates, rating territories, when applicable
  • Other information to familiarize us with the company and its operations.

After Demotech’s review and analysis process is completed, the company will be presented with the opportunity to finalize the assigned Financial Stability Rating®.

Where can I find the Financial Stability Rating® (FSR) for a particular company?

You can search our site to view our companies here

How do I contact a company listed on Demotech’s website?

We cannot provide contact information for insurers that do not finalize their FSR.  All of the information we have available is published on our website.

For those companies that have finalized their FSR, we provide a link to their website.

Comparative Financial Observations™ (CFOs)

What is a Comparative Financial Observation™ (CFO)?

Comparative Financial Observations™ (CFOs) represent Demotech’s assessment of insurance companies based on publicly available financial information and summarize our opinion of certain fundamental financial metrics.  CFOs are not a replacement, substitute, or approximation of a Financial Stability Rating®.  You can learn more about the CFO definitions here.

Which companies have CFOs assigned to them?

Demotech assigns CFOs to property and liability companies that have not finalized their Preliminary Financial Stability Rating® (PFSR).

Relevant Terms

Admitted Assets

The assets permitted by state law to be included in an insurance company’s financial statements. These assets are an important factor when regulators measure insurance company solvency, and are generally considered to be assets that can be readily converted to fulfill current and future obligations. Admitted assets include bonds, stocks, mortgages, real estate, cash, contract loans, other invested assets, and accounts receivable.

Assumed Reinsurance Premium

The premium from policies an insurer accepts, in whole or in part, from another insurance company.

Ceded Reinsurance Premium

The premium from policies an insurer transfers, in whole or in part, to another insurance company.

Direct Premium Written

The premium associated with a policy issued by the primary insurer to the insured.

Gross Premium Written

The total direct premium written and reinsurance assumed as recorded by the primary insurer. Formula: Direct Premium Written + Reinsurance Assumed = Gross Premium Written

Group

Group refers to the distinctive NAIC Group, or family, to which a company belongs.

Jurisdictions

Jurisdictions indicate an authorized insurer of a particular state or jurisdiction. Each state or jurisdiction can issue a license, or Certificate of Authority, to each qualified insurer submitting an application to write business in the respective state or jurisdiction.

National Association of Insurance Commissioners (NAIC)

An organization of insurance regulators whose primary purpose is to protect the interests of insurance consumers. The NAIC also promotes competitive markets, promulgates industry accounting rules and procedures, and performs market conduct examinations of insurers.

NAIC Company Number

A unique number assigned to insurance companies for identification and reporting purposes. The NAIC company number is assigned by the National Association of Insurance Commissioners.

Net Premium Written

The total premium for a primary insurer consisting of direct premium written and reinsurance assumed, less reinsurance ceded. Formula: Direct Premium Written + Reinsurance Assumed – Reinsurance Ceded = Net Premium Written

Nonadmitted Assets

The assets excluded from the insurance company’s financial statements, as they do not support the solvency of the insurer. Nonadmitted assets include, but are not limited to, furniture, supplies, automobiles and uncollected premiums.

Policyholders’ Surplus

Under statutory accounting, the capital and surplus of an insurance company are collectively referred to as surplus as regards policyholders or policyholders’ surplus. Policyholders’ surplus, which is equivalent to owners’ equity for a noninsurance entity, is equal to net admitted assets, or admitted assets minus liabilities. Using the term policyholders’ surplus instead of owners’ equity emphasizes the priority given to satisfying policyholders’ obligations.

Premiums Earned

Premiums earned represent the portion of insurance premiums written applicable to the expired period of the policy term.

Unearned Premiums

Unearned premiums represent the portion of insurance premiums written that has not yet been earned and is attributable to unexpired coverage (the insurer’s remaining contractual obligation). When the premium is written, the entire amount of the premium is unearned. As policies age, the unearned premium amount decreases, and written premiums become premiums earned.

Written Premium

The amount an insurance company receives for insurance protection provided through an issued policy.

Negative Net Premium Written

In certain cases, it is possible for a company to show negative Net Premium Written. The nature and timing of reinsurance transactions, which may affect Gross Premium Written or Net Premium Written, can result in a temporary situation of negative Net Premium Written. While this situation is atypical, other contributing factors could be the assumption and ceding of premium related to the sharing of risk between companies. Negative Net Premium Written could also be attributed to a company discontinuing operations, the cancellation or commutation of a specific reinsurance agreement, the assumption of a block of premium by a startup company, or other uncommon events. If you are a policyholder insured by a company with negative Net Written Premium, you can take some comfort in the fact that this means that the insurance company has likely prepaid its reinsurance including its coverage for catastrophe losses, so that policyholders are protected.