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Financial Stability Ratings®

Financial Stability Ratings® (FSRs) are a leading indicator of the financial stability of Property and Casualty insurers, Title underwriters, and other risk-bearing entities.  Our rating process provides an objective baseline for assessing solvency based upon changes in financial stability, as presented in an insurer’s balance sheet over time.  FSRs represent our opinion of a company’s ability to survive a downturn in economic conditions as well as a downturn in the underwriting cycle and meet its policyholder obligations in any event.  FSRs are based upon a series of quantitative ratios and certain qualitative factors.

Our unique focus

Demotech’s focus on determining ratings is unique. While Demotech acknowledges and recognizes the importance of the profitability of the entity assigned a rating, we believe that balance sheet strength and financial integrity are the ultimate determinants of the long term financial stability required to honor or defend meritorious claims. Accordingly, while operating profit remains an important element and consideration of FSRs, the ability of an insurer to remain financially stable under a variety of economic scenarios requires a focus on balance sheet integrity, including a review of the quality and quantity of reinsurance protection as well as the relative adequacy of loss and loss adjustment expense reserves.

Demotech believes that financial stability can be independent of size.  We believe well-managed, properly reinsured, regional and specialty insurers can be as financially stable as larger insurers.

Our proven track record

Demotech was the first to review and rate independent, regional and specialty insurers, beginning in 1989.  We have a long and independently verified track record identifying financially stable insurers.  Our published study, Serious About Solvency®, as well as multiple independent analyses, demonstrate that survival rates of insurance companies assigned Financial Stability Ratings® compare favorably with our stated expectations and the published survival rates for other rating agencies.  Contact us today to learn more about our impressive track record.

Benefits of finalizing a Financial Stability Rating®

Financial Stability Ratings® can help level the playing field for your insurance company.  FSRs are accepted by the secondary mortgage marketplace, virtually all mortgage lenders, agents’ errors and omissions carriers, umbrella insurance markets, certain HUD programs, premium finance companies, and others.  You can learn more about the benefits of finalizing an FSR here or by contacting us.

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Financial Stability Ratings® Definitions

A Financial Stability Rating® summarizes our opinion as to an insurer’s ability to insulate itself from the business cycle that exists in the general economy as well as the underwriting cycle that exists in the insurance industry.

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Property & Casualty Review

Financial stability can be independent of size. Small, well-managed Property & Casualty insurers are more financially stable than larger, highly leveraged insurers.

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Title Underwriter Review

Size is not necessarily indicative of financial stability. Small, well-managed title underwriters are more financially stable than larger, highly leveraged title underwriters.

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Life, Health, or Fraternal Insurance Review

Financial stability can be independent of size. Small, well-managed health insurance companies are more financially stable than larger, highly leveraged life, health or fraternal insurance companies.

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Self-Funded Entities Review (Pools)

Small, well-managed self-funded entities are more financially stable than larger, highly leveraged self-funded entities, as financially stability can be independent of size.

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Comparative Financial Observations™ (CFO)

Demotech focuses on insurance fundamentals, including loss and loss adjustment expense (L&LAE) reserve adequacy, liquidity of invested assets, the quick ratio and the quality of reinsurance.

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Financial Stability Ratings® represent Demotech’s opinion of the ability of an insurer to meet its insurance related obligations based upon our assessment of financial information and other information.  FSRs do not constitute a warranty of a company’s ability to meet its contractual or legal obligations; are not recommendations to buy, sell or hold any securities, or to make any investment decisions related to the rated entity; and are not an endorsement of any particular insurer or its products. Insureds, agents, and third parties need to independently evaluate any relationship with a particular insurer as well as the applicability of an insurer’s products to the needs of the insured or agent.