Insurance Company Ratings

Insurance companies are rated by several rating companies described below. While they clearly are not perfect, they each attempt to provide ratings based upon their evaluation of the financial strength of each company. Factors that they consider include: (1) The amount of cash reserves, (2) The diversity of their income, (3) their debt ratio (total debt divided by total assets), and (4) The types of risks assumed.

Companies that provide ratings are as follows:

Ratings AgencyIndustryRatings offered (highest to lowest)
A.M. BestInsurance onlyA++, A+, A, A-, B++, B+, B, B-, C++, C+, C, C-, D, E, F
DemotechInsurance onlyA", A', A, S, M, L
Standard and Poor'sAll industriesAAA, AA+, AA, AA-, A, A+, A, BBB, BB, B, CCC, CC, C, R, SD, D
Moody'sAll industriesAaa, Aa1, Aa2, Aa3, A1, A2,A3, Baa1, Baa2, Baa3, Ba1, Ba2, Ba3, B1, B2, B3, Caa1, Caa2, Caa3, Ca, C
FitchAll industriesAAA, AA+, AA, AA-, A+, A, A-, BBB+, BBB, BBB-, BB+, BB, BB-, B+, B, B-, CCC+, CCC, CCC-, CC, C, D

Ratings used by a given agency are not directly comparable with one another. An A from one agency may be better or worse than an A rating from another.

While the ratings provided by ratings agencies can give you a good idea of an insurer's financial strength, they are not perfect. For example, Merced Insurance had an A- rating from A.M. 8est, but the company went bankrupt in 2018 after the extensive wildfires that occurred in California that year. Standard & Poor's, Moody's and Fitch all gave strong ratings to Enron prior to its collapse.