Several insurance companies compete for structured settlement business. The financial strength of each company is rated by private financial rating companies. Each rating company uses specific criteria to evaluate an insurance company's ability to meet its financial obligations. Among the rating companies are AM Best, Fitch, Moody's, Weiss and Standard & Poor's. AM Best is the most often cited. The ratings are based on a thorough analysis of quantitative and qualitative data. An insurer's financial strength is best understood when all of the ratings are used to compare the companies.
Unfortunately, the ratings companies do not have a uniform system of classifying strength. For example, A.M. Best uses a scale in which a letter grade is assigned along with a series of positive or negative signs. A company with A.M. Best's highest rating receives an A++ while Standard & Poor's highest rating is AAA. To be a serious candidate for a claimant, an insurer should have at least an A.M. Best rating of A and most claimants choose an insurer with an A+ or better rating.
The ratings help settlement planners determine which company's offer to recommend to a claimant. After a market survey has been completed, the companies offering the most money for a given premium are judged in part based on their ratings. Great ratings can provide some assurance that the chosen insurer will remain solvent and be able to make the promised future payments.