What financial strength ratings mean for customers in the insurance industry

June 26, 2018 | SECURA Insurance

When looking for an insurance provider, the ability to pay claims is likely at the top of your priority list. Put simply, you want to know that your insurance company is going to deliver when you need it most. 

One way to understand whether or not an insurance company is stable enough to reliably pay claims, even in the event of large losses, is by looking at its financial strength ratings. Two of the key industry benchmarks to consider in the property-casualty (P&C) industry are A.M. Best’s Financial Strength ratings and Ward's 50®.

These ratings speak to the financial stability of insurance carriers. While each designation represents a unique perspective on the strength of top-rated insurers, for customers, they are both symbols of consistency and reliability.

A.M Best Financial Strength Ratings

Best’s ratings, which are issued through A.M. Best Rating Services, Inc., are a recognized indicator of insurer financial strength and creditworthiness. That means when it comes time to pay a claim, no matter how financially significant, top-rated insurers are able to answer the call.

A.M. Best looks at more than 100 key financial variables for the past five years to truly understand a company’s performance and its ability to deliver for customers.

According to Best, its ratings are “based on a comprehensive quantitative and qualitative evaluation of a company's balance sheet strength, operating performance, business profile and enterprise risk management.”

Ward's 50® P&C Companies

Each year, Ward Group evaluates the financial performance of approximately 3,000 U.S.-based P&C insurance companies. To be considered for Ward’s 50, the company first ensures that P&C carriers have passed all safety and consistency screens. Beyond those standards, Ward looks to identify the top 50 performers over a five year period based on key performance metrics.

Among the measurements Ward considers are things like average returns on equity, assets, and revenue, as well as growth and combined ratio

In short, being among Ward’s 50 is a sure sign that an insurance company is strong from both an operations and growth standpoint. 

Both A.M Best Financial Strength Ratings and Ward’s 50 are important benchmarks that you should look for when considering your coverage options. Long-term stability is vital to customer satisfaction in any financially focused industry, and the P&C insurance world is no exception.

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