BIBA partners with Litmus to help members assess unrated insurers

The British Insurance Brokers’ Association (BIBA) has introduced a free online facility for its members that will help with due diligence if they choose to use unrated non-life insurers.

The BIBA Litmus Test Report facility was designed with the analytical support of Litmus Analysis and uses data from AM Best to present a number of key financial ratios for a number of unrated insurers most often used by BIBA members.

The report benchmarks the ratios of a company against a representative UK insurer cohort to illustrate, in terms relative to other relevant companies, its financial strength at the point in time of the available public financial data.

“At present there is no legal or regulatory requirement for an insurer to have a rating, nor is there a legal or regulatory requirement for an insurance broker to use only rated carriers and this online tool will give valuable support for our members when deciding whether the financial standing of an insurer they are considering placing business with is sufficiently robust or not,” said Steve White, BIBA CEO.

The BIBA Litmus Test Report will not give a rating to insurers in the same way as credit rating organisations will.

Instead, it provides financial ratios including underwriting, investment and reserve leverage percentages as well as underwriting profitability and liquidity.

The data is backed up by a number of detailed guides written by Litmus to help brokers interpret the numbers and make a decision about whether or not to choose that insurer.

In the online tool an initial coverage of 30 insurers can be checked using a simple search facility. The insurer coverage will evolve as BIBA responds to the needs of its members and will be updated regularly as market practice changes and capacity shifts.

Peter Hughes, managing director of Litmus Analysis, said: “This tool will help brokers in their decision making process. It takes financial data provided by AM Best and condenses it into a number of key financial pointers that can be interpreted using the guides.

“This is a giant leap forward for brokers who previously may have had no support when wading through insurer report and accounts to ascertain the financial strength of a company.”

Steve White added: “This facility has been created in response to overwhelming interest from our members because up until now there has been no recognised due diligence method to ascertain the strength of unrated insurers other than pouring over the insurer’s report and accounts.

“This new tool will allow our members to more easily make a judgment about whether they are comfortable to use an insurer or not.”