What do companies use to assess the financial strength of an insurer?

Companies rely on independent rating services to evaluate the financial strength of insurers. These rating agencies analyze a range of factors, including the insurer's financial statements, claims-paying ability, market performance, and overall management practices. The resulting ratings provide a reliable benchmark for the financial stability and credibility of the insurer, which is crucial for consumers and businesses looking to purchase insurance products.

This assessment helps companies determine if an insurer can meet its future obligations to policyholders, thereby mitigating the risk associated with underwriting insurance policies. In contrast, while market analysis, risk evaluation, and actuarial science play important roles in the insurance industry, they do not specifically focus on the financial strength assessment the way independent rating services do. Market analysis looks more at competitive positioning, risk evaluation is about understanding potential losses, and actuarial science pertains to the mathematical and statistical methods used in insurance calculations.