Carrier Financial Rating
Key Takeaway
An independent assessment of an insurance company's financial strength and ability to pay claims, issued by rating agencies such as AM Best, Standard and Poor's, Moody's, or Fitch. Law firms should select carriers rated A- or better by AM Best to ensure the carrier has sufficient financial resources to pay future claims.
Definition
An independent assessment of an insurance company's financial strength and ability to pay claims, issued by rating agencies such as AM Best, Standard and Poor's, Moody's, or Fitch. Law firms should select carriers rated A- or better by AM Best to ensure the carrier has sufficient financial resources to pay future claims. Lower-rated carriers pose a risk of insolvency.
Why This Matters for Law Firms
Underwriting terms determine what you pay for coverage and what terms you receive. Law firms that understand the underwriting process can present their risk profile more effectively, negotiate better terms, and avoid surprises at renewal. This knowledge is particularly valuable when shopping for new coverage or responding to carrier questions.
Example Usage in Context
A firm preparing for its annual insurance renewal might encounter this in the carrier's proposal: "The underwriter has adjusted our carrier financial rating based on our claims history. Let's discuss with our broker whether we can improve this at our next renewal."
Related Q&A
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