A Comprehensive Examination of Insurer Financial Strength Ratings

14 Pages Posted: 8 Dec 2017

See all articles by Cassandra R. Cole

Cassandra R. Cole

Florida State University - College of Business

Enya He

University of North Texas

Kathleen A. McCullough

Florida State University - College of Business

Multiple version iconThere are 2 versions of this paper

Date Written: December 7, 2017

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.

Keywords: Financial Strength Ratings, Selection Bias, Unsolicited Ratings, Demotech, A. M. Best

Suggested Citation

Cole, Cassandra R. and He, Enya and McCullough, Kathleen A., A Comprehensive Examination of Insurer Financial Strength Ratings (December 7, 2017). Journal of Financial Perspectives, Vol. 4, No. 1, Available at SSRN: https://ssrn.com/abstract=3084076

Cassandra R. Cole (Contact Author)

Florida State University - College of Business ( email )

423 Rovetta Business Building
Tallahassee, FL 32306-1110
United States

Enya He

University of North Texas ( email )

1155 Union Circle #305340
Denton, TX 76203
United States
(940) 565-3060 (Phone)
(940) 565-4234 (Fax)

Kathleen A. McCullough

Florida State University - College of Business ( email )

Department of Risk Management and Insurance
150 Rovetta Business Building
Tallahassee, FL 32306-1110
United States
850-644-8358 (Phone)
850-644-4077 (Fax)

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