Will American Insurance Companies Go into Liquidation?(1)
Many customers often ask: is the insurance company reliable? Will it go bankrupt? What if it goes bankrupt? Others have asked whether insurance company policies and contracts depend on the count? After the 2008 financial crisis, almost everyone had questions about the insurance companies, worried about their failure or breach of their contracts. It's normal for consumers to have these questions, and today's article explains these questions in more detail.
In the United States, there are independent organizations that assess the financial strength and claims of insurance companies as a benchmark for consumers. The three largest reputation ratings are Stand and Poor's, Moody's and Fitch, known as Big3, the first two are full-time American companies, and Fitch, which once owned a British stake but is now fully American . They assess the debt repayment and receivables of the company based on factors such as its balance sheet, track record and future prospects, and are classified separately, represented by the letters A, B, C and D (Moody's only to C), each representing a note.
A represents a small risk, B indicates a certain risk, while C represents a high risk and D is bankrupt. Each level is subdivided, like AAA to A- and seven more, and B into 9. If you get the most advanced AAA, it is generally considered to be safe or very low risk. In general, if the insurance company obtains a grade A rating, it is more reliable and less prone to failure, if the rating of the company is BB or higher, it means that there is a certain risk, attention , B or B - companies are better not to touch, C or D is more to be avoided far.
In addition to assessing a business, the three agencies also assess government issues, which are so powerful that each adjustment can affect a country and even global financial markets.
After the financial crisis, no other company dares to boast that they will not fall, even if it dares to say it, nobody believes, after all, more than 100 years of history Wall Street financial leader Lehman Brothers said that 'he fell. But a little analysis will show that insurance companies are more reliable and less prone to bankruptcy than banks. In the bank to save money, as soon as the wind blows people want to put the bank deposits, which forms a race. If the race is in the wind, more than the bank's emergency reserves, the bank will go bankrupt, because the bank will absorb your deposits, in addition to a small number of daily cash, to meet the requirements from the Federal Reserve, most of them are used for relatively long-term investments, such as home loans, industrial and commercial loans, these investments have a certain period of time, can not be drawn at any time . So if there is a large-scale race, the banks will just go bankrupt and the FED will take over.
