S&P Global Ratings (S&P) — formerly known as Standard and Poor's — is a financial services company recognized as one of the “Big Three” credit rating agencies — the other two are Moody’s and Fitch Ratings. S&P provides information about a life insurance company’s financial strength, including its capacity for risk and likelihood to default, among other factors.
At Policygenius, we compile our best life insurance company recommendations each year using several factors – including third-party ratings.
Why do S&P’s ratings matter for life insurance shoppers?
S&P ratings can help you make a more informed decision about a potential insurer’s financial health.
This is particularly important when shopping for life insurance because your policy’s death benefit will pay out after you’re gone, so you want to be confident that your beneficiaries are in good hands.
As a globally renowned source for opinions on the financial strength of banks, money markets, bond funds, and insurance companies, S&P weighs the outstanding debts and other financial risks of national life insurance companies and rates them according to a detailed scale.
How does the S&P Global Ratings scale work?
S&P focuses on three main components when rating insurance companies:
Creditworthiness (Issuer Credit)
Financial strength
Credit outlook (CreditWatch)
These ratings, like Moody’s, account for both short- and long-term financial risk.
S&P Issuer Credit Ratings
S&P Issuer Credit Ratings account for:
Capacity and willingness for the insurer to meet its financial commitments when due
The nature of the company’s financial obligations
Company stability in the event of bankruptcy, reorganization, or any other adverse financial situation
Long-Term Issue Credit Ratings
Category | Definition |
|---|---|
AAA | An obligor rated 'AAA' has an extremely strong capacity to meet its financial commitments. 'AAA' is the highest issuer credit rating assigned by S&P Global Ratings. |
AA | An obligor rated 'AA' has a very strong capacity to meet its financial commitments. It differs from the highest-rated obligors only to a small degree. |
A | An obligor rated 'A' has a strong capacity to meet its financial commitments, but is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligors in higher-rated categories. |
BBB | An obligor rated 'BBB' has an adequate capacity to meet its financial commitments. However, adverse economic conditions or changing circumstances are more likely to weaken the obligor’s capacity to meet its financial commitments. |
BB, B, CCC, and CC | Obligors rated 'BB', 'B', 'CCC', and 'CC' are regarded as having significant speculative characteristics. 'BB' indicates the least degree of speculation and 'CC' the highest. While such obligors will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposure to adverse conditions. |
BB | An obligor rated 'BB' is less vulnerable in the near term than other lower-rated obligors. However, it faces major ongoing uncertainties and exposure to adverse business, financial, or economic conditions that could lead to the obligor’s inadequate capacity to meet its financial commitments. |
B | An obligor rated 'B' is more vulnerable than the obligors rated 'BB', but the obligor currently has the capacity to meet its financial commitments. Adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitments. |
CCC | An obligor rated 'CCC' is currently vulnerable and is dependent upon favorable business, financial, and economic conditions to meet its financial commitments. |
CC | An obligor rated 'CC' is currently highly vulnerable. The 'CC' rating is used when a default has not yet occurred but S&P Global Ratings expects default to be a virtual certainty, regardless of the anticipated time to default. |
SD and D | An obligor is rated 'SD' (selective default) or 'D' if S&P Global Ratings considers there to be a default on one or more of its financial obligations, whether long- or short-term, including rated and unrated obligations but excluding hybrid instruments classified as regulatory capital or in nonpayment according to terms. |
*Ratings from 'AA' to 'CCC' may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the rating categories.
Information courtesy of S&P Global Ratings
Short-Term Issuer Credit Ratings
Category | Definition |
|---|---|
A-1 | An obligor rated 'A-1' has a strong capacity to meet its financial commitments. It is rated in the highest category by S&P Global Ratings. Within this category, certain obligors are designated with a plus sign (+). This indicates that the obligor's capacity to meet its financial commitments is extremely strong. |
A-2 | An obligor rated 'A-2' has a satisfactory capacity to meet its financial commitments. However, it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligors in the highest rating category. |
A-3 | An obligor rated 'A-3' has an adequate capacity to meet its financial obligations. However, adverse economic conditions or changing circumstances are more likely to weaken the obligor's capacity to meet its financial commitments. |
B | An obligor rated 'B' is regarded as vulnerable and has significant speculative characteristics. The obligor currently has the capacity to meet its financial commitments; however, it faces major ongoing uncertainties that could lead to the obligor's inadequate capacity to meet its financial commitments. |
C | An obligor rated 'C' is currently vulnerable to nonpayment that would result in an 'SD' or 'D' issuer rating and is dependent upon favorable business, financial, and economic conditions to meet its financial commitments. |
SD and D | An obligor is rated 'SD' (selective default) or 'D' if S&P Global Ratings considers there to be a default on one or more of its financial obligations, whether long- or short-term, including rated and unrated obligations but excluding hybrid instruments classified as regulatory capital or in nonpayment according to terms. |
Information courtesy of S&P Global Ratings
S&P Insurer Financial Strength Ratings
An S&P Global Ratings insurer financial strength rating evaluates the financial security of an insurance company. This rates an insurer’s ability to pay out its insurance policies and contracts in accordance with their terms.
However, the financial strength ratings doesn’t account for a company’s cancellation penalties, timeliness of payments, nor how likely it is to deny claims.
S&P Insurer Financial Strength Ratings
Category | Definition |
|---|---|
AAA | An insurer rated 'AAA' has extremely strong financial security characteristics. 'AAA' is the highest insurer financial strength rating assigned by S&P Global Ratings. |
AA | An insurer rated 'AA' has very strong financial security characteristics, differing only slightly from those rated higher. |
A | An insurer rated 'A' has strong financial security characteristics but is somewhat more likely to be affected by adverse business conditions than are insurers with higher ratings. |
BBB | An insurer rated 'BBB' has good financial security characteristics but is more likely to be affected by adverse business conditions than are higher-rated insurers. |
BB, B, CCC, and CC | An insurer rated 'BB' or lower is regarded as having vulnerable characteristics that may outweigh its strengths. 'BB' indicates the least degree of vulnerability within the range and 'CC' the highest. |
BB | An insurer rated 'BB' has marginal financial security characteristics. Positive attributes exist, but adverse business conditions could lead to insufficient ability to meet financial commitments. |
B | An insurer rated 'B' has weak financial security characteristics. Adverse business conditions will likely impair its ability to meet financial commitments. |
CCC | An insurer rated 'CCC' has very weak financial security characteristics and is dependent on favorable business conditions to meet financial commitments. |
CC | An insurer rated 'CC' has extremely weak financial security characteristics and is likely not to meet some of its financial commitments. |
SD and D | An obligor is rated 'SD' (selective default) or 'D' if S&P Global Ratings considers there to be a default on one or more of its financial obligations, whether long- or short-term, including rated and unrated obligations but excluding hybrid instruments classified as regulatory capital or in nonpayment according to terms. |
*Ratings from 'AA' to 'CCC' may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the rating categories.
Information courtesy of S&P Global Ratings
S&P CreditWatch Outlook ratings
S&P uses CreditWatch to identify financial and credit-related trends of an insurance company. An insurer might be placed under CreditWatch in the following situations:
After a recent event, such as a merger or acquisition
When there’s been a significant change in the company’s performance
The insurer has made an impactful change in their operations
CreditWatch Ratings Outlooks
Rating | Meaning |
|---|---|
Positive | A rating may be raised |
Negative | A rating may be lowered |
Stable | A rating is not likely to change |
Developing | A rating may be raised, lowered, or affirmed |
Information courtesy of S&P Global Ratings
How Policygenius uses S&P Global Ratings
Policygenius takes a comprehensive approach to determine the best life insurance companies available.
We don’t get paid for reviews and evaluate an extensive rubric of criteria, including S&P ratings, to come up with robust, unbiased reviews to match you with the right life insurance company.
S&P ratings factor into our Confidence category: consumer confidence based on scores from major financial rating institutions. We normalize ratings from S&P, Moody’s, and A.M. Best, and give companies a score out of 10.
To learn more, you can compare our life insurance company reviews or read our complete ratings methodology.
Frequently asked questions
How do I choose the best life insurance company?
The best life insurance company for most shoppers is one that offers the cheapest premiums for the amount of coverage they need. Beyond price and benefit amount, looking at a company’s third-party financial ratings and customer reviews should factor into your decision.
What life insurance company ratings should I look at?
Third-party ratings from firms like A.M. Best, S&P Global Ratings, and Moody’s can give you peace of mind that a company is financially stable and will be around for a long time. You can also look at customer reviews from the Better Business Bureau and J.D. Power. These should be taken with a grain of salt, but you can be on the lookout for recurring complaints.
What is a good S&P rating?
S&P rates companies on a scale from AAA to D. The higher the rating (closer to AAA), the stronger the company’s financial stability. A reputable insurance company will also be accompanied by a “Positive” or “Stable” CreditWatch outlook rating.
