CHAPTER 4 - D

Question 1

How does a buyer ascertain which insurers are the most stable?

Answer 1

They could pore through various companies’ balance sheets and annual reports, but this isn’t the most practical
approach and it requires certain financial and analytical skills.

Question 2

four main organisations that conduct the rating process

Answer 2

• Standard & Poor’s;
• Fitch;
• A. M. Best; and
• Moody’s.

Question 3

Rating agencies

Answer 3

• publishing their results for public consumption.
• These are independent opinions of an insurer’s strength and are not influenced in any way by the insurer itself.
• providers of wider financial
  market intelligence.
• provide risk evaluations, investment research and credit ratings to their clients who can be individuals as well as organisations

Question 4

what do rating agencies consider?

Answer 4

insurer’s ability to pay claims

considers operating performance (which includes factors such as the quality of the management of the business, and past profitability)

business profile