A. Key Credit Factors Overview
The main factors used by Fitch in support of the core fundamental credit analysis of an
insurance company or group follow below. These factors are grouped by those that are
qualitative in nature, and those that are primarily quantitative. Various types of insurance
ratings to which these factors apply are discussed in Section XI-B.
Key qualitative factors are:
• Sovereign and country-related constraints
• Industry profile and operating environment
• Market position and size/scale
• Ownership
• Corporate governance and management
Key quantitative factors are:
• Capitalization and leverage
• Debt service capabilities and financial flexibility
• Financial performance and earnings
• Investment and asset risk
• Asset/liability and liquidity management
• Reserve adequacy
• Reinsurance, risk mitigation, and catastrophe risk
Where applicable and material, Fitch may assess any non-insurance-related risks or exposures
based on the appropriate Fitch rating methodology for that exposure.
In very select cases, an additional qualitative factor that can limit the rating level exists for startup
and runoff organizations. See Section VII for details.
The financial ratios discussed in this section are high level, and provide an overview of select
key ratios applicable at a global level. These global ratios are discussed in more detail
beginning on page 33. In practice, more than just these ratios are used in support of Fitch’s
analysis.
These credit factors are applied to the analysis of the “rating unit,” which may be an individual
insurance company, consolidated group, or part of a group, depending on the rating exercise.
Defining the rating unit(s) is the first step in Fitch’s analysis.
As part of its general assessment, Fitch may consider market-based indicators, such as credit
default swap (CDS) rates, bond prices, market-implied ratings, market value of equity, and
share price movements. Fitch’s ratings are based exclusively on the credit fundamentals of an
insurer, while these market-based indicators are used to help identify relative degrees of
financial flexibility, as well as being a tool to identify changes in market information and
sentiment.