FSRs are a leading indicator of financial stability, providing an objective baseline of the future solvency of an insurer. They are accepted by several government-sponsored enterprises, including Fannie Mae, Freddie Mac, various programs of the United States Department of Housing and Urban Development (HUD), and mortgage lenders as well as premium finance companies.
Demotech is the only company, in addition to AM Best, that is acceptable to insurance carriers of agent E&O policies, and the insolvency exclusion in many policies include companies with Demotech rating of A.
What does this rating mean?
Many consumers and agents are used to seeing an AM Best rating; as a result, we are frequently asked “What level of AM Best rating is similar to your Demotech ‘A’ rating?”
The quality of financial stability rating is measured by the percentage of companies that became impaired or insolvent a certain number of years after the rating was earned by a company. The chart below compares the impairment percentage of the different levels of Demotech and AM Best ratings in years after a rating was earned by a company.
This analysis shows that a Demotech “A” rating is comparable to an AM Best “A” rating.