Knowledge Description How do insurance companies rating Insurance Tips

Category: Insurance tips Release Date: 2006-08-01

The international rating agencies are independent of the private sector, they are not subject to government control, but also independent of any rated objects. They have a large number of laboratory and detailed information, scientific analysis of the use of advanced technology, have a wealth of practical experience and extensive expertise to develop industry standards are very strict, standardized. Therefore, they made a high credit ratings authority. These rating agencies rating the accuracy of results is quite reliable. Such as through the analysis of the insurance company becomes insolvent Best rating the previous two years and found that an accurate prediction probability of up to 79%. Of course, the risks involved due to the probability of the insurance industry, rating agencies also affected by the ratings, it is impossible to achieve completely accurate. At the same time, high-grade does not mean that insurance companies will survive, it only indicates that the higher the level, the greater the likelihood to survive; Similarly, the low-grade does not mean necessarily bankrupt insurance company, it just shows that the lower level, the possibility of bankruptcy greater.

USA's leading insurance rating agencies have the following five: Al-Fred. Best (AMBest), Moody's (Moodgs), standard. Poole (Standard & Poor) and Wales (Weiss), La Duff & Phelps (Duff & Phelps ). The most famous of which was established in 1940 AMBest company, it is an example below to describe the basic conditions of rating agencies.

(1) Rating for: only to meet certain financial criteria (at least 1 million U.S. dollars capital) of the insurance company's rating. (2) Rating Source: The data collected from the property and liability insurers and life and health insurance company annual statements. Before rating for the insurance company to require at least five years of financial data. (3) The ratings take into account factors: underwriting, management, reserves, net premiums and investment, rating results are based on the insurance company's financial information and Best's established standards for comparison. The size of the insurance companies have been removed in the rating factor, because the company does not mean that the company is running a large scale stability of a strong financial position. (4) The rating agencies sources of income: the results from the use of these ratings insurance companies and insurance products, buyers. (5) rating classification: After a financial review, the insurance company can get a letter grade, the change range from A + + to F, respectively, from the best to correspond to the general, to the worst ratings, which grade in America's educational system used scoring system is similar, easily understood and accepted by consumers. At the same time the company also Best rating of insurance companies that do not assess "financial performance rating" (FPR), this level less than the letter grades used in the year of data. Best grades used by the company as well as the text with their corresponding evaluation, as follows:

AMBest the company's appraisal rating:

Letter grade financial rating (FPR)

Security level

A + +, A + the best FPR-9, FPR-8 U

A, A-excellent FPR-7, FPR-6-liang

B + +, B + very good in the FPR-5

Risk rating

B, B-good enough in the FPR-4

C + +, C + normal FPR-3, FPR-2 in the next

C, C-barely

D is very dangerous no rating views

E subject to government intervention in FPR-1 did not evaluate

F Bankruptcy Liquidation

The other four rating companies have used the letter grade, but the various rating agencies use different rating criteria, such as Standard & Poor, and Duff & phelps adopted the so-called "claims the ability level," but they are evaluation results are highly relevant.

Of these institutions into similar credit rating. The first four level indicates that the subject being evaluated the credibility of high-performance risk, affected by unfavorable economic environment, the impact of low level of solvency strong, and is worthy of trust. Starting from the fifth grade indicates that the credibility is low, performance high risk by the impact of adverse economic environment, a higher degree.

Of course, they made credit rating does not have to be evaluated in recommending the meaning and obligations of the object, but for people to the decision-making reference. Therefore, they bear a moral obligation to the community, but does not bear any legal responsibility.