The ALIRT Way refers to our unique philosophy as regards the analysis of insurer financial strength. This philosophy is based on three core principles:
- Legal Entity Focus: Analysis should focus primarily on the legal entity that is writing the insurance contract and not an insurer’s parent (i.e. holding company). This approach reflects two basic facts:
- Generally, holding companies are not legally required to make good on their subsidiaries’ insurance contracts. Implicit support of these contracts always involves a” trust-me” factor.
- When insurance company subsidiaries are sold or spun off, the legal obligation to the insured almost always remains with the insurer underwriting the policy – and not the selling parent organization.
- Regular and On-Going: Carrier financial oversight should be regular and on-going. No one can predict the future and given the vast number of variables impacting future financial performance, good due diligence should be continuous.
- Quantifiable and Measurable: Analysis should be based on quantifiable financial metrics, embedded within a system that includes relative and absolute benchmarks for easy and accurate measurement.