Comparing American and Japanese Insurers Financial Strength

Consumers, investors, regulators, and researchers use insurer ratings to evaluate the strength of insurers. Insurer financial strength ratings provide a rating agency s opinion of the insurer s overall financial strength and ability to meet its policyholder obligations. As such, ratings are meant to be a summary of insurer s financial strength. The purpose of this paper is to assess the financial strength of property-liability insurers by using A. M. Best s rating technique focusing on quantitative standards. American and Japanese each six larger property-liability insurers are selected as examples. A quantitative evaluation of these insurers financial strength and operating performance relative to the Best s top group is carried out. The quantitative evaluation is done in 5 key areas; growth, efficiency, profitability, solvency, and liquidity. The results show that advanced American and Japanese insurers maximize their profit by focusing on efficient asset management and underwriting performance in order to take comparative advantages in a competitive industry.