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Property & Casualty Review

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

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

Developed in 1988, Demotech, Inc.’s Financial Stability Analysis Model was the first model universally applied to Property & Casualty insurers of all sizes. Our quantitative model was utilized before risk-based capital, dynamic financial analysis, or enterprise risk management was introduced on an industry-wide basis.

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:

  • Pro forma financial statements and business plans
  • 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
  • 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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