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A comprehensive examination of insurer financial strength ratings

Author

Listed:
  • Cole, Cassandra R.

    (College of Business, Florida State University)

  • He, Enya

    (South Central U.S., Lloyds)

  • McCullough, Kathleen A.

    (Florida State University)

Abstract

While unsolicited financial strength ratings have been studied in the banking literature, these sometimes controversial ratings have not been studied in insurance. Utilizing data from multiple sources, including a proprietary dataset, we provide the most comprehensive examination of insurer financial strength ratings to date and the first analysis of unsolicited ratings for U.S. property-liability insurers. Similar to bank ratings, we find that insurers’ unsolicited ratings tend to be lower than solicited ratings. We also find some consistency in the importance of organizational and key financial characteristics when comparing the results for unsolicited and solicited ratings across the agencies.

Suggested Citation

  • Cole, Cassandra R. & He, Enya & McCullough, Kathleen A., 2017. "A comprehensive examination of insurer financial strength ratings," Journal of Financial Perspectives, EY Global FS Institute, vol. 4(1), pages 65-78.
    • Handle: RePEc:ris:jofipe:0101
    as

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    More about this item

    Keywords

    Financial Strength Ratings; Selection Bias; Unsolicited Ratings; Demotech; A. M. Best;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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