Providers of credit opinions and analysis of financial institutions, including insurers. For a listing of rating agencies that cover the insurance industry, see Chapter 13.
Internationally recognized firms specialized in analyzing the risk of public and private institutions, both financial and other. Careful analysis results in a rating which serves as an indicator of the risk assumed by those who invest in a country or company. Some of these firms include S&P, Moody´s, Atlantic Rating, and Lipper.
Organizations which provide the service of evaluating the relative creditworthiness of Issues and assigning Ratings to them, such as Moody's Investors Service, Inc., Standard & Poor's Corporation, and Fitch's Investors Service.
As well as the risk deriving from movements in general interest rates, debt instruments usually carry an element of default risk. For most debt instruments, investors must assess the credit quality of the issuer and decide whether the extra yield offered compared to the relevant Treasury bond (or equivalent benchmark) is sufficiently attractive. However, most investors have neither the time nor the expertise to perform the required credit analysis. Even those who do have the appropriate skills seldom wish to waste time analysing all companies they might possibly invest in at some time in the future. In practice, almost all investors rely, to a greater or lesser degree on the credit analysis of the rating agencies. Not only do the agencies have highly skilled analysts but they also have access to private information about the company (as part of their terms to the issuer). They may not reveal such data but do include it in their assessment. Thus, on average, their credit assessments are better informed than anyone elses. The two best known rating agencies are Standard & Poors and Moody's.
Rating agencies determine the issuerâ€(tm)s ability to meet their debt obligations to the investors. Agencies include Moodyâ€(tm)s, Standard & Poorâ€(tm)s (S&P) and Fitch IBCA.
Six major credit agencies determine insurers' financial strength and viability to meet claims obligations. They are A.M. Best Co.; Duff & Phelps Inc.; Fitch, Inc.; Moody's Investors Services; Standard & Poor's Corp.; and Weiss Ratings, Inc. Factors considered include company earnings, capital adequacy, operating leverage, liquidity, investment performance, reinsurance programs, and management ability, integrity and experience. A high financial rating is not the same as a high consumer satisfaction rating.
A number of companies assign a risk level to the bonds or debt issued by a government. Risk means the likelihood of default or nonpayment. The lower the risk of nonpayment, the lower the interest the government must pay. Some rating agencies give a AAA rating to the least risky government bonds.
Agencies specialised in the analysis of the financial status of a company, and in the subsequent assignment of a quality (credit) rating. The most important rating agencies include Standard and Poors and Moody's. Rating is also practised in relation to countries, and provides useful information to investors on the quality of bonds issued by the local government. Français: Agences de notation Español: Agencia de calificación crediticia, agencia de calificación de valores, organismo de clasificación de valores
Independent firms engaged to rate the creditworthiness of securities for the benefit of investors. The major rating agencies are Fitch Ratings, Standard & Poor's and Moody's Investors Service.
