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What is the definition of Rating Agencies?

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Rating Agencies are agencies that provide ratings on the insurance companies' financial standing. It also provides an indication of how stable and solvent a company is - how it is able to meet claims obligations. A high rating means that the company is stable and can be expected to have the ability to pay all policyholder claims.

Rating agencies base their finding on several company performance indicators. These include capital adequacy, company earnings, loss ratios, operating leverage, management ability, experience and integrity, liquidity, investment performance and reinsurance programs.

Currently, there are six major credit agencies. These are Standard & Poor's Corp., Moody's Investors Services, A.M. Best Co., Duff & Phelps Inc., Fitch, Inc and Weiss Ratings, Inc.

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