Disclaimer: I haven’t read the entire article yet…. but I have a few key observations.
The presence of multiple ratings agencies in the market is a good thing, despite the possibility that one isn’t as effective as the others. I’m not claiming one (e.g. Weiss) is not as good as the others, but merely that all aren’t necessarily credible simply because they exist. Weiss is a lesser known agency, but its rating method generates ratings that may vary from those of other ratings agencies, which should result in discussions of particular companies to reconcile the differences, or not. The details used in the varying ratings gives the end users more insight, and that is a good thing.
The dispersion of grades for each company rated should be disclosed by each rating agency. I see this in the inner cover of each of the two AMB Insurance Reports, but am not aware of such a dispersion (distribution) of ratings grades by Weiss, etc. Greater variance of A, B, C, D, F grades for one agency versus the other indicates a finer level of distinctions that may be helpful to consumers of the ratings.
The rating factors used to generate a stat (total value, numeric or otherwise) to assign companies to letter grades should be given in terms of bands of the stats for each grade, and a basic formula, not the proprietary formula used by the agency, should be provided to edify all consumers, including the seasoned insurance pros who more often use the grades to assess their own performance, rather than their financial solidity.
The first paragraph has a typo; dsiputes. Auto correct shut down? Auto correct switched language selection to an Eastern European language?
Weiss ratings are usually controversial – I suppose a subscription service needs to stay in the headlines and get new customers by selling something the other rating agencies are not.
They raise an interesting point about conflict of interest – insurers pay the other rating agencies for their ratings and we remember how that worked with credit rating agencies and the subprime mortgage crisis. I wonder how Weiss rated Poe, Magnolia, or Homewise before they went under. They point to Swagrass as the feather in their cap but they’ve also rated others with D or C ratings that continue to succeed and expand outside Florida (Heritage, Homeowners Choice, Universal).
The final point: being unable to pay claims financially is one thing (which annual statements and OIR filings should give a picture of), but not being able to service a large number of claims operationally is worth looking at. How many of the 70,000 open claims belong to the “weak” rated insurers?
Wow, Weiss thought Sawgrass was in trouble. I think everyone employed in the P&C industry in Florida could see Sawgrass was about to check out. I didn’t put a single policy with them for at least 18 months before they went kablooey.
Sawgrass was a soft landing because Demotech managed it. Book of business was assumed and claims have been honored. As other rating agencies, no look at reinsurance treaties means no look at vertical and horizontal program and no look at carrier retention.
Like rating a consumer based on the cash they have on them and never looking at their investments!
Disclaimer: I haven’t read the entire article yet…. but I have a few key observations.
The presence of multiple ratings agencies in the market is a good thing, despite the possibility that one isn’t as effective as the others. I’m not claiming one (e.g. Weiss) is not as good as the others, but merely that all aren’t necessarily credible simply because they exist. Weiss is a lesser known agency, but its rating method generates ratings that may vary from those of other ratings agencies, which should result in discussions of particular companies to reconcile the differences, or not. The details used in the varying ratings gives the end users more insight, and that is a good thing.
The dispersion of grades for each company rated should be disclosed by each rating agency. I see this in the inner cover of each of the two AMB Insurance Reports, but am not aware of such a dispersion (distribution) of ratings grades by Weiss, etc. Greater variance of A, B, C, D, F grades for one agency versus the other indicates a finer level of distinctions that may be helpful to consumers of the ratings.
The rating factors used to generate a stat (total value, numeric or otherwise) to assign companies to letter grades should be given in terms of bands of the stats for each grade, and a basic formula, not the proprietary formula used by the agency, should be provided to edify all consumers, including the seasoned insurance pros who more often use the grades to assess their own performance, rather than their financial solidity.
The first paragraph has a typo; dsiputes. Auto correct shut down? Auto correct switched language selection to an Eastern European language?
Good insight. Sounds like you may be an actuary or work for a rating service.
Wow, Polar. I haven’t seen any of your comments without a dislike in a very long time. I guess your detractors haven’t awakened yet.
Weiss ratings are usually controversial – I suppose a subscription service needs to stay in the headlines and get new customers by selling something the other rating agencies are not.
They raise an interesting point about conflict of interest – insurers pay the other rating agencies for their ratings and we remember how that worked with credit rating agencies and the subprime mortgage crisis. I wonder how Weiss rated Poe, Magnolia, or Homewise before they went under. They point to Swagrass as the feather in their cap but they’ve also rated others with D or C ratings that continue to succeed and expand outside Florida (Heritage, Homeowners Choice, Universal).
The final point: being unable to pay claims financially is one thing (which annual statements and OIR filings should give a picture of), but not being able to service a large number of claims operationally is worth looking at. How many of the 70,000 open claims belong to the “weak” rated insurers?
how many of them are AOB claims? I’d bet a healthy chunk of them are AOB.
I really wouldn’t worry about another hurricane hitting Florida for at least another 20 years so by then all these carriers will be flush with cash.
They all look like geniuses when the wind doesn’t blow.
Wow, Weiss thought Sawgrass was in trouble. I think everyone employed in the P&C industry in Florida could see Sawgrass was about to check out. I didn’t put a single policy with them for at least 18 months before they went kablooey.
Sawgrass was a soft landing because Demotech managed it. Book of business was assumed and claims have been honored. As other rating agencies, no look at reinsurance treaties means no look at vertical and horizontal program and no look at carrier retention.
Like rating a consumer based on the cash they have on them and never looking at their investments!