Due Diligence and Ongoing Monitoring

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  • 1.  Due diligence on Insurance Company

    This message was posted by a user wishing to remain anonymous
    Posted 07-07-2023 01:41 PM
    This message was posted by a user wishing to remain anonymous


    We offer credit life insurance to our bank customers.  what's the due diligence documents we need to obtain?

    I searched prior posts someone mentioned we can check the insurance company rating.  Since this is the 1st time I onboard an insurance company vendor (and don't know insurance industry too much), can anyone share more information about due diligence on insurance company such as where to check the rating?  or this is something the insurance company can provide us?  

    Appreciate any feedback and many thanks in advance! 

  • 2.  RE: Due diligence on Insurance Company

    Posted 07-20-2023 03:04 PM

    Since you are using your insurance agency as a vendor, conducting due diligence is important. This standard due diligence checklist is helpful.

    Due Diligence Checklist

    When it comes to the insurance company ratings, many of the ratings are based on the same information your organization would gather for financial health due diligence, because the purpose of insurance company financial ratings is to evaluate the financial security of an insurer. Rating agencies will typically consider

    • Amount of cash on hand
    • Debt ratio (debt divided by financial assets)
    • Diversity of revenue streams
    • Risk management protocols
    • Quality of insurance policies written (e.g., not all policies are for high-risk people)

    In theory, your organization can determine the same information during your financial review.

    If you are inclined to use an agency, here is a list of agencies and the ratings they offer.

    Ratings agency


    Ratings high- low

    A.M. Best

    Insurance only

    A++, A+, A, A-, B++, B+, B, B-, C++, C+, C, C-, D, E, F


    Insurance only

    A'', A', A, S, M, L

    Standard and Poor's

    All industries

    AAA, AA+, AA, AA-, A, A+, A, BBB, BB, B, CCC, CC, C, R, SD, D


    All industries

    Aaa, Aa1, Aa2, Aa3, A1, A2, A3, Baa1, Baa2, Baa3, Ba1, Ba2, Ba3, B1, B2, B3, Caa1, Caa2, Caa3, Ca, C


    All industries

    AAA, AA+, AA, AA-, A+, A, A-, BBB+, BBB, BBB-, BB+, BB, BB-, B+, B, B-, CCC+, CCC, CCC-, CC, C, D

    It's important to note that ratings from different agencies cannot be directly compared to each other. For instance, an A grade from one agency might not necessarily be equivalent to an A grade from another agency. For this reason, your organization may be better off reviewing the vendor's financial health so the outcomes are consistent with the rest of your processes. Those are my thoughts, but I would love to hear from other members.

  • 3.  RE: Due diligence on Insurance Company

    Posted 07-20-2023 03:19 PM

    Thank you very much, Hilary! 

    This is very helpful and informative! Appreciate!