We’ve been talking about it since the BIBA conference earlier this year, and now the British Insurance Brokers’ Association has launched its BIBA Litmus Test Report.
The free-to-use online facility is available for BIBA members and is designed to help them carry out due diligence on unrated non-life insurers.
The facility was built with the support of Litmus Analysis and capitalises on data from AM Best to present a number of key financial ratios.
“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,” said Peter Hughes, Litmus Analysis managing director. “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.”
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.
Steve White, BIBA Chief Executive said: “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,” explained Steve White, BIBA chief executive.
The BIBA Litmus Test Report will not give a rating to insurers in the same way as the well-known credit rating organisations. 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.
“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,” White concluded. “This new tool will allow our members to more easily make a judgment about whether they are comfortable to use an insurer or not.”
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