Demotech, Inc. Review

Unbiased Financial Strength Ratings

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Everyone has to have insurance to protect property, health, automobiles and more in the event of a loss. There are many different insurance companies to choose from but how can you know you are getting the best value on an insurance policy? Insurance rating organizations can tell you how financially stable an insurance company is and whether it is a good choice for your insurance needs. One such company is Demotech, Inc.

Company History

Demotech, Inc. is based in Columbus, Ohio and was founded in 1985 as a consulting firm that provides financial stability ratings for property and casualty insurance companies. These ratings help investors and consumers determine the solvency of an insurance company based on several determining factors including the company's balance sheet and other quantitative ratios. The company specializes in providing ratings and detailed financial analysis of regional and specialty insurers.

Demotech, Inc. is a trusted name in the insurance industry. In 2007, Demotech, Inc. was named as the official insurance research partner of Insurance Journal, a leading insurance news publication. Demotech, Inc. provides reports on insurance industry performance and financial results to news organizations.

The company was also the first insurance rating organization to have its rating process reviewed and approved by HUD, Fannie Mae, and Freddie Mac.

Demotech, Inc. offers financial stability ratings for insurance companies of all sizes.

How Demotech, Inc. Ratings are Determined

Demotech, Inc. takes pride in saying that it has “leveled the playing field” by providing financial stability ratings to insurance companies of all sizes. The company's philosophy regarding financial stability is that even small insurers can be as financially stable as the largest insurance companies.

Its rating system is different than some of the other insurance rating organizations such as A.M. Best, Fitch's or Moody's. Financial stability is not determined by size alone but also by many other factors. Some of the factors used by Demotech, Inc. to determine financial stability ratings include:

  • Total assets, liabilities, revenues and expenses
  • Working capital
  • Administrative expenses
  • Net income
  • Surplus
  • Receivables
  • Amount of business written
  • Industry focus
  • Business model

What Demotech, Inc. Ratings Mean

  • A'' (A Double Prime), Unsurpassed:Regardless of the severity of a general economic downturn or a deterioration in the insurance cycle, one hundred percent of the insurers receiving a Financial Stability Rating® of A'' (A double prime) are expected to have positive surplus as regards policyholders as of eighteen months from the initial date of rating assignment.
  • A' (A Prime), Unsurpassed Insurance companies who earn the “A Prime Unsurpassed” rating from Demotech, Inc., are expected to have unsurpassed financial stability and be able to pay all policyholder claims regardless of economic downturn or changes in the insurance marketplace. Ninety-nine percent of these insurance companies are expected to maintain a positive surplus for 18 months from the initial date of the rating assignment.
  • A, Exceptional Insurance companies who earn the “A Exceptional” rating from Demotech, Inc. are expected to have exceptional financial stability and be able to pay all policyholder claims regardless of economic downturn or changes in the insurance marketplace. Ninety-seven percent of these insurance companies are expected to maintain a positive surplus for 18 months from the initial date of the rating assignment.
  • S, Substantial Insurance companies who earn the “S Substantial” rating from Demotech, Inc. are expected to have acceptable financial stability and be able to pay all policyholder claims regardless of economic downturn or changes in the insurance marketplace. Ninety-five percent of these insurance companies are expected to maintain a positive surplus for 18 months from the initial date of the rating assignment.
  • M, Moderate Insurance companies who earn the “M Moderate” rating from Demotech, Inc. are expected to have moderate financial stability and be able to pay all policyholder claims regardless of economic downturn or changes in the insurance marketplace. Ninety percent of these insurance companies are expected to maintain a positive surplus for 18 months from the initial date of the rating assignment.
  • L, Licensed Insurance companies with an “L licensed” rating are licensed by state regulatory authorities. These companies have been accessed but have not been given one of the financial strength ratings listed above.
  • NR, Not Rated Insurers with an “NR” rating have not been rated by Demotech, Inc.
  • N/A, Ineligible If an insurance company is given an “N/A Ineligible” rating, it could not be rating because of incomplete financial data.

The Bottom Line

If you want an unbiased look at the financial strength of your insurance company and how it may perform in the future, you may want to try the services of Demotech, Inc. Demotech, Inc. has demonstrated its ability to provide trustworthy financial strength ratings to the insurance industry since 1985. The company's approach is to take an objective look at an insurance company based on more than just its size. Demotech takes a unique approach to providing unbiased financial strength ratings of insurers to news organizations and consumers. To learn more about Demotech, Inc.'s financial stability ratings, visit the Demotech, Inc. Website, email info@demotech.com or call 1.800.354.7207.