Standard and Poor’s (S&P) Insurance Company Ratings Explained

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Natasha McLachlan is a writer who currently lives in Southern California. She is an alumna of California College of the Arts, where she obtained her B.A. in Writing and Literature. Her current work revolves around insurance guides and informational articles. She truly enjoys helping others learn more about everyday, practical matters through her work.

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Laura Walker graduated college with a BS in Criminal Justice with a minor in Political Science. She married her husband and began working in the family insurance business in 2005. She became a licensed agent and wrote P&C business focusing on personal lines insurance for 10 years. Laura serviced existing business and wrote new business. She now uses her insurance background to help educate...

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Reviewed by Laura Walker
Former Licensed Agent

UPDATED: Sep 24, 2020

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Standard & Poor’s Company provides ratings for insurance companies to help you choose the best company for your needs and avoid potential losses if the company you purchase a policy from should become insolvent. Standard and Poor’s ratings cannot prevent bad things from happening as a result of your insurance choices, but they can at least give you some insight to help make a better, more informed decision. To insure their ratings are accurate and trustworthy, the Standard and Poor’s ratings are designated by a team of financial analysts who look at a range of credit criteria before issuing a rating.

Standard and Poor’s Letter Gradations

AAA Superior These are the top rated companies in the financial field. Triple A ratings are viewed as stable and trustworthy.
AA Excellent Companies with a double A rating are stable and have met most of the requirements of a top rating but still have area where some improvement may be necessary.
A Good For consumer purposes, this could be considered an average rating. Dealing with companies of an A or higher rating is usually a safe investment, both in the short and long terms.
BBB Fair This rating, while stable, indicates that the company has undergone financial stresses recently. Before investing, it would be wise to investigate the company further.
BB Needs Improvement This is the middle rating on the Standard and Poor’s rating system. Companies rated higher than BB are usually safe investments, while companies rated lower may be an indication that the company is experiencing some sort of financial difficulty.
B Barely acceptable This rating could be a good sign for investors who are looking for a company about to turn around, but it indicates a company that is not trusted enough for long term insurance policies at the consumer level.
CCC Poor This rating indicates the company is experiencing internal problems or is being affected by external pressures. A CCC rating is not a good choice for purchasing insurance and should only be considered as an investment after careful investigation.
CC Exceptionally poor Severe problems have either occurred or are forecast for the company. A CC rating shows little stability and not much indication of potential future growth without investor intervention.
C Failing Companies rated C may not be insolvent, but they are not on stable financial ground. This rating is the lowest available from Standard and Poor’s rating system, and is generally assigned to companies with uncertain financial futures.

Lack of Ratings

Just because Standard and Poor’s does not have a rating for a particular company does not mean that the company is insolvent or even going through hard financial times. More often than not, a lack of rating means that the company did not submit the necessary information, that there were gaps in the grading criteria, or some other review process has been stalled. Companies which do poorly are not excluded from the ratings, but ratings can only be given to companies that have been fully evaluated.

Ratings Changes

In order to provide you with the most accurate information possible, Standard and Poor’s ratings are updated regularly. Rarely, a company may be downgraded by 2 or more ratings grades, but most companies only vary by one grade over an extended period of time. If you are investigating a company and the ratings have changed, it could indicate that the company is going through changes that left the analysts uncertain about future potential stability.

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