Is your Insurance Company sound?

Well there's been a series of news articles in The Insurance Journal (www.insurancejournal.com) about 1st quarter 2009 loses for some of the major insurance carriers. Meanwhile profitable insurance companies are making purchases as quickly as they can. (see

Contractors should be concerned about the solvency of their insurance company. While price is an important consideration the ability for the carrier to pay claims should be equally (if not more) important. Two sources for checking the financial stability of your insurance company are:

AM Best is one of the leading sources for ratings. Anyone can go to www.ambest.com and check the ratings for their current insurance company. A quick search of their web site shows that:
"Best's Credit Ratings are independent opinions regarding the creditworthiness of an issuer or debt obligation. Best's Credit Ratings are based on a comprehensive quantitative and qualitative evaluation of a company's balance sheet strength, operating performance and business profile, or, where appropriate, the specific nature and details of a debt security. "
While AM Best lists most insurance companies they do not list Risk Retention Groups (or if they do the RRG is so new that their AM Best rating can be lower than what would be expected.

Another source is Demotech at www.demotech.com. Demotech includes Risk Retention Groups and other carriers not covered by AM Best and either assigns them a rating or a CFO (Comparative Financial Observation) which is color coded.

A third source is the Internet. Yes I know that sounds redundant but many companies are publicly traded and their quarterly financials are on line for investors. A quick review of the balance sheet can show profit (or for many losses).

Any contractor (or insured) should check both sources and any other outside source for financial stability information. Your agent should also be able to provide information about the financial stability of the carrier.