A Comprehensive Examination of Insurer Financial Strength Ratings
14 Pages Posted: 8 Dec 2017
Date Written: December 7, 2017
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
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