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Life, Health, or Fraternal Insurance Review

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

Demotech, Inc. is the first company to review the financial stability of Health Maintenance Organizations (HMOs) and publish independent financial opinions. Since 1987, Demotech has continued to analyze the financial stability of the health insurance industry and will assign Financial Stability Ratings® to virtually all health insurers, largest to smallest.

Demotech reviews and assigns Financial Stability Ratings® to start-up as well as established health insurers. The review of start-ups or insurers that have less than five years of representative historical operating history requires additional information be submitted for assignment of a Financial Stability Rating®.

Our rating process is based on an analysis of a series of quantitative ratios and certain qualitative considerations.

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
  • 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 and 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 preliminary Financial Stability Rating®.

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