Financial strength ratings key to broker placement, reveals survey

High-grade insurance financial strength ratings have become even more important to brokers deciding where to place their risks.

That is according to research from broker-only commercial insurer NIG.

The findings revealed that almost nine out of 10 (85%) top UK commercial brokers said the ratings had become more essential in the wake of the financial crisis.

Of those 51% “absolutely” believed the insurer’s financial strength rating had become more paramount, 34% said “yes, but not very” and 15% “not really”.

Similarly an insurer’s financial strength rating was the most reviewed headline metric by brokers when assessing an insurance firm with 84% of brokers putting it top of the list, followed by solvency calculation such as an insurance group directive or Solvency I ratio (41%) and gross written premium (35%).

The survey of 100 leading brokers, which is the first of its kind, also found that 12% reckoned an insurer’s credit rating was “not very” important versus 54% who said a strong rating was “very” important when choosing which insurance company to place business with and 34% for whom it was “quite” important.

As an indication of the importance of ratings to commercial brokers, 31% of respondents said they looked at an insurer’s rating as the only test when evaluating an insurance firm’s capability and business fit – despite the fact that they could name three such metrics.

Jon Greenwood, managing director of NIG, said: “In the wake of the financial crisis, it is reassuring that the vast majority of brokers see an insurer’s rating as increasingly important when placing business.”

He said that ratings had become a even bigger topic of interest in recent years due in part to their prominence in the news.

Greenwood, who hosted an event for 150 brokers last night, told Insurance Times that brokers took very seriously the responsibility of selecting the right insurer for their clients on a range of factors, particularly financial strength, which they had succeeded in heightening the awareness of in the current economic climate.

“I think it is an inevitable consequence of the financial crisis that as the topic of ratings becomes much more visible and people worry about the impact of what is now an expanded recession on all sorts of different firms that they will increasingly look at the financial stability and strength of the companies that they are dealing with,” he said.

Whereas in the past clients may not have been so savvy about ratings, now a greater emphasis is place on education and understanding at all levels of the process.

The survey of commercial brokers coincides with UK Insurance Ltd, of which NIG is a part, being awarded financial strength ratings of A from S&P and A2 from Moody’s on Monday.