Insurance Company Ratings

Since the vast majority of structured settlements are funded with annuity contracts, much attention is paid to the quality of the annuity issuers.

Life insurance companies are highly complex financial entities. Assessing their creditworthines is no job for amateurs. For this reason, the parties rely on private rating agencies to do it for them. Rating agencies audit and review the companies and issue formal opinions on their creditworthiness. For simplicity, they use grading systems such as: A, B, C, etc.

The standard in structured settlements for many years was to accept no less than an A+ rating from the AM Best Company. Similar ratings are available from Standard & Poor's (S&P), Moody's, Duff & Phelps, and others. While they all use slightly different grading systems, claimants generally accept no less than "investment grade" quality funding assets.

[How meaningful is the "+" in a rating? It's hard to quantify and the issue is open to debate. Rating agencies have been known to change their rating designation notations without any credit quality change whatsoever in the underlying companies being graded. The very highest AM Best ratings is now "A++" but not many companies hold that rating. Using this rating as strict criteria would likely exclude numerous high quality companies with more competitive prices. Similarly, one probably shouldn't exclude an "A" rated company out of hand, if it appears otherwise advantageous to use them. This is a value decision.]