by John Darer CLU ChFC MSSC CeFT RSP CLTC
The Guide to Understanding Insurance Ratings in a very important NEW information resource for consumers, including tort victims, structured settlement consultants, settlement planners, financial planners, lawyers for tort victims, judges, corporate and insurance risk managers.
A Supplement to the September 2008 Best's Review The Guide to Understanding Insurance Ratings includes coverage of :
- Financial Health-solvency and the primary cause of impairments; state guaranty associations, high profile insolvencies and why; details of agency oversight. A particularly useful graph illustrates the primary causes of insurance company impairments. According to State Insurance Department Data, from 1969-2007 deficient loss reserves (38.1%) and rapid growth (14.4%) were the leading causes of property/casualty company impairments while indequate pricing (25.9%), rapid growth (15.2%) and affiliate problems (19.8%) and Investment Problems (14.7%) were the leading cause on the life/health side. On the P/C side investment porblems only represented the cause of 8.9% of impairments.
- Best's Credit Ratings
- Highly Rated Insurers including those who have stood the test of time with A+ A.M. Best ratings, for over 50 years.
- Analysis Techniques- financial ratios, including the specific tests for property/casualty and life/health insurers; linking capital and risk(BCAR ratio). Each ratio is explained in detail and presented with practical examples using well known insurers. The graphic illustration of industry combined ratios through the decades of the 1970s, 1980s, 1990s and from 2000 beyond is helpful. Also helpful to structured settlement stakeholders is a segment on the difference between life/health and property/casualty insurers.
- Reinsurance-A discussion on reinsurance and how it is used.
- Industry Leaders. The insurance groups incorporating structured settlement annuity writers represent 8 of the Top 20 Life/Health Writers based on 2007 admitted assets.
For the structured settlement consultants, settlement planners and financial planners looking to be able to explain the finanical and business condition of the structured annuity issuer or qualified assignment company in a clear and objective manner it is prudent to have an understanding of the analysis behind the company rating and to be able to articulate what it means to clients and other structured settlement stakeholders.