Panel of insurers

Insurance Companies can be either rated or unrated. There are benefits and disadvantages to both, so it is best to be aware of the facts before you decide which type suits you and your situation best.

What is an unrated insurer?

There are several high-profile international ratings agencies, who assess the financial stability of insurers and other financial institutions. The most well known are Standard & Poor’s, Moody’s, Fitch and A.M. Best. Where an Insurer has chosen not to be assessed, they do not receive a rating and therefore are classed as “Unrated.”

Each agency has its own method of scoring, but the ratings are usually based on letters, to indicate the degree of credit risk posed. For example, an “A” rating means the insurer has access to plenty of credit and therefore easily able to meet claims. “C” rating indicates that the Insurer has poor ability to meet outstanding claims.

There is no legal requirement for an insurer to be rated and brokers are not restricted to only doing business with rated insurers. Although Premium Choice’s preferred option is to use rated insurers, in some situations, it may be in your interests to be offered rates from unrated insurers.

Both rated and unrated insurers are capable of going bust, however unrated insurers have a higher risk of failing.

Why do we offer policies from unrated insurers?

Sometimes, these policies may be the most appropriate to you and your circumstances;

• They may offer a very competitive and attractive premium.
• Sometimes, we may have no other option other than to offer you a policy from an unrated insurer.
• Some unrated insurers have been dealing in the UK for several years and are deemed to be less risky.
• Their reputation may be supported by the Financial Conduct Authority, who themselves also authorise rated insurers.

What are the disadvantages of using an unrated insurer?

• Unrated Insurers are at a higher risk of becoming insolvent and not being able to pay out on claims.
• They may lack the appropriate levels of financial stability.
• Some unrated insurers, many of whom are based in European countries, are not subject to the same solvency test and regulations as UK based insurers.
• The unrated insurer my be difficult to contact directly should an issue or a concern about a policy arises.
• Claims payments may be delayed.

The Financial Services Compensation Scheme

The scheme is designed to protect policyholders when UK – based insurance companies and other financial institutions become insolvent. The FSCS may pay some claims that a failed unrated insurer cannot meet, but will not offer 100% compensation in every case. For more information, visit https://www.fscs.org.uk/.