Financial Strength Ratings assess an insurance company's ability to meet policyholder obligations. It should be noted, however, that the ratings are not recommendations to purchase or discontinue a policy, contract, or security issued by an insurance company, nor are they guarantees of financial strength.
CRISIL's rating methodology for non-life and life insurance companies entails assessing the companies on a standalone basis, as well as assessing the level of parent/government support that they receive.
On a standalone basis, CRISIL evaluates a company on a number of criteria, such as:
- Industry risk and business risks across segments
- Financials
- Risk management systems
- Goals and strategies and projected business plan
- Parental support, if any
The Financial Strength Ratings do not take into account:
- Timeliness of payment or the likelihood of the use of a defence, such as fraud, to deny claims
- Any potential that may exist for foreign exchange restrictions to prevent policy obligations from being met (for insurance companies with cross-border or multi-national operations, including those conducted by branch offices or subsidiaries)
- The insurance company's ability to meet non-policy obligations (that is, debt contracts)
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