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How can I assess the financial strength of an insurance company?

Five independent agencies—A.M. Best, Fitch, Moody’s, Standard & Poor’s, and Weiss—rate the financial strength of insurance companies. Each has its own rating scale, its own rating standards, its own population of rated companies, and its own distribution of companies across its scale. Each agency uses numbers or plusses and minuses to indicate minor variations in rating from another rating class.

The agencies disagree often enough so that you should consider a company’s rating from two or more agencies before judging whether to buy or keep a policy from that company. Moreover, agencies will announce changes of ratings on any day. It’s probably prudent to check annually on the ratings of any company you’re interested in.

Some points for using the ratings:

• Don’t rely only on what the insurance companies say about their ratings from these agencies. Companies are likely to highlight a higher rating from one agency and ignore a lower one from another agency, or to select the most favorable comments from a rating agency’s report.
• To use the ratings from more than one independent agency, you need to understand that each agency’s rating code is different from the others. For example, an A+ from A.M. Best is the next-to-top rating of its 15 categories, but an A+ from Fitch or S&P is their 5th-highest rating (out of 24 categories for Fitch, and out of 19 categories for S&P). Moreover, Moody’s doesn’t have an A+ rating.

However, the ratings can be classified into “secure” and “vulnerable” mega-categories. Here, as of August 2005, are the rating scales for each of the “secure” rating classes, and all the “vulnerable” classes combined (source, except for Weiss: The Insurance Forum, September 2005 issue).

Ratings Agency Contact Information

All of the ratings agencies can be found on the Web, or reached by phone.

Agency	Web site	Address	Phone number
A.M. Best Company, Inc	www.ambest.com	Ambest Rd. Oldwick, NJ 08858	908-439-2200
Fitch Ratings	www.fitchibca.com	1 State Street Plaza New York, NY 10004	1-800-75-FITCH
Moody’s Investor Services*	www.moodys.com	99 Church Street New York, NY 10007	212-553-0300
Standard & Poor’s Insurance Ratings Services*	www2.standardandpoors.com	55 Water Street New York, NY 10004	212-438-2000
Weiss Research**	www.weissratings.com	15430 Endeavor Drive Jupiter, FL 33478	800-289-9222
*To use these Web sites, you have to register, but it’s free. **Weiss charges $14.99 for each rating.  However, its public Web site lists the ten highest and ten lowest ranked companies, and the companies themselves might reveal their Weiss rating.