Explaining the Insurance Company Credit Rating

When there’s a business accident or a fight breaks out in a venue space, even a small injury can be financially challenging for the business owner. To help safeguard against faulty or exaggerated claims, owners might consider purchasing nightclub liability insurance from companies with a favorable credit rating. These companies are sometimes known as “A” rated companies, which means that they are considered by independent agencies to have a strong ability to pay policyholder claims and stay financially solvent. There are four prominent insurance rating agencies: Fitch & Standard, A.M. Best, Moody’s and Poor’s. It is important to know which agency gave the insurance company its “A” rating; though their scores may look similar, each organization’s standards and criteria are different.

A.M. Best’s second-best rating of “A+” is identical to Fitch’s fifth-best (also “A+”). Scores generally range from “C” or “D” (very weak) to “A” and beyond (AAA+++). In the most extreme scenarios, these credit ratings are important because they attempt to predict a company’s financial strength. The higher the score, the less likely a company will experience financial failure, bankruptcy or closure. In fact, it’s not uncommon for independent contractors to require insurance with an “A” rating before completion of a project or job.

Nightclub liability insurance companies with high credit ratings have been judged more likely to be there for business owners when they need it most.