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 likelihood to default.
At Policygenius, we factor ratings from third parties into our best life insurance company recommendations each year — including S&P’s.
Life insurance terms you should know
Beneficiaries: The people you name on your life insurance policy to receive the lump sum of money — also known as the death benefit — when you die.
Cash value: The portion of a permanent life insurance policy’s monetary value that grows tax-deferred over the life of the policy.
Death benefit: The amount of money the life insurance company will pay your beneficiaries when you die.
Face amount: The dollar amount, or death benefit, your beneficiaries receive if you die while your life insurance policy is active.
Insured: The person who is covered by the insurance policy.
Policy: The legal document that includes the terms and conditions of your life insurance contract.
Policyholder: The person who owns an insurance policy. Usually, this is the same person as the insured.
Permanent life insurance: A type of life insurance that lasts for the rest of your life and usually includes a cash value account.
Premium: The amount you pay your insurance company to keep your coverage active. Premiums are typically paid monthly or annually.
Riders: Add-ons to a life insurance policy that provide more robust coverage, sometimes for an extra cost.
Term life insurance: A life insurance policy that lasts for a set number of years before it expires. If you die before the term is up, your beneficiaries receive a death benefit.
Underwriting: The process where an insurance company evaluates the risk of insuring you and determines your final rate.
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 you want to be confident that if you die while your policy is active, your insurance company will be able to pay out the death benefit to your loved ones.
S&P is a globally renowned source for opinions on the financial strength of banks, money markets, bond funds, and insurance companies. The agency 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 issuer credit ratings
Category | Definition |
|---|---|
AAA | An obligor rated ‘AAA’ has an extremely strong capacity to meet its financial commitments. This is the highest issuer credit rating assigned by S&P Global Ratings. |
AA | An obligor rated ‘AA’ has a very strong financial capacity. It differs from the highest-rated obligors only to a small degree. |
A | An obligor rated ‘A’ has a strong financial capacity, 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 financial capacity. 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 rates an insurer’s ability to pay out its insurance claims and contracts in accordance with its 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. This 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 lowest 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 does Policygenius use S&P Global Ratings?
Policygenius takes a comprehensive approach to determine the best life insurance companies available.
We 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. We don't get paid for our reviews.
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.
