Chapter 10 Flashcards
Rating Agency
Who pays rating agencies to provide an opinion of their financial strength
The board/ Themselves. Usually larger insurance companies. Effectively a marketing tool not a compliance requirement.
Rating Agency
Why would you appoint a rating agency to give their opinion on their financial strength
Keep the measure of their ability to pay claims and offers an opinion on their financial strength
Rating Agency
Why would insurance company prefer to have a Financial strength rating
It demonstrates they can meet their financial commitments
It looks good in comparison to different insurers
It’s good that you can charge a higher premium
Brokers are more likely to use you if high
Rating Agency
What nine things will a rating agency look at
1. Economic and industry risk 2 competitive position 3. Management and corporate strategy 4. Enterprise risk management 5. Operating performance 6. Investments 7. Capital adequacy 8. Liquidity 9. Financial flexibility
When A rating agency looks at the economic and industry risk what does that mean
It looks at the sector in which the company operates in/ threats if new entrants etc
When a rating agency looked at the competitive position what does that mean
Looks at the insurance company strategy in comparison to competition
When a rating agency looks at the management and corporate strategy what does that mean
Look at the quality and credibility of the insurance senior management team and strategy it is set
When a rating agency looks at the enterprise risk management what does that mean
It is a method by which a company manages risk. Most large insurers expected have an effective ERM to earn a stronger financial ratings
When A rating agency looks at the operating performance what does that mean
This involves looking at the performance ratios- Can be loss ratio, expense ratio, combined ratio, return on equity etc
When a rating agency looks investments what does that mean
Looks at how an insurance investment strategy fits with its liability profile
When a rating agency looked at capital adequacy what does that mean
Look at the quality and level of capital required to run a business based on a risk appetite
Went to write an agency looked at liquidity what does that mean
The ability to manage cash flows efficiently and easily borrow money required
When a rating agency looks at financial flexibility what does that mean
This looks the insurers potential need for additional capital liquidity in the future
Rating Agency
What is the superior rating for standard and Poor
AAA
Rating Agency
Is C And D a good rating for standard and Poor
No
