Insurance Company Analysis

Fitch Learning

How long?

  • 3 days
  • online

Fitch Learning


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Who should attend

The workshop is designed for fixed income, banking, insurance and credit risk professionals. It is targeted at an intermediate level and assumes a basic understanding of accounting and insurance products. The two-day workshop Understanding Insurance Financial Statements is designed as a preparation for those with limited experience of insurance accounts.

About the course

The overall goal of this three-day workshop is to provide a systematic approach to the credit risk and financial strength analysis of life and non-life insurance and reinsurance companies.

Key Learning Outcomes:

  • Understand the business and financial risks inherent in the life and non-life insurance and reinsurance industries
  • Use qualitative and quantitative analysis and market indicators to distinguish strong and weak performers by sector and to detect early warning signals of deteriorating financial strength
  • Analyse and stress test financial statements in the context of differing accounting standards and reporting practices
  • Appreciate how economic, competitive and regulatory issues impact the risk profile, performance and financial health of an insurance company
  • Apply a structured approach to identify key risks and mitigants when transacting with insurance and reinsurance companies, and to appreciate the main methods of capital-raising by insurers.

Analytic Overview

A structured approach to the credit analysis of insurance and reinsurance companies and an overview of how insurance companies are assessed by different market observers.

  • Purpose / payback model: a structured approach to credit analysis and its applicability to insurance and reinsurance companies
  • Insurance ratings: insurer financial strength and credit ratings, ratings of group members, derivation of various "issue ratings" from the issuer's default rating
  • Use of debt and equity market indicators to highlight possible concerns.

Operating Environment

A review of the key macro-economic and sector trends which may impact adversely or favourably on certain insurers and business lines, and a look back at how the life, non-life and reinsurance sectors have previously been affected by stressed operating conditions.

Macro-economic and sector issues

  • Investment cycles: stock, property and credit market levels and their volatility
  • Causes of recent fluctuations in strength of the life, non-life and reinsurance sectors
  • Underwriting cycles in various markets
  • Mortality, morbidity and longevity trends
  • Climate change; trends in insured losses from catastrophes
  • Impact of inflation and cultural changes in litigation
  • Non-life reserving issues: redundancy or deficiency; asbestosis and environmental liabilities
  • Competitive factors: market fragmentation; penetration levels in emerging vs. mature markets.

Regulation and supervision

  • Key methods of regulating insurance companies: minimum solvency margin, investment and business restrictions
  • EU Solvency I and II; overview of US and Bermuda regulation; Solvency II equivalence
  • Group supervision and group solvency: double leverage in financial conglomerates, capital requirements of non-insurance businesses, EU Insurance Groups Directive (IGD)
  • Degree of comfort from quality of supervision
  • Exercises: historic and prospective impact of the operating environment on life and non-life insurers and reinsurers; Double Leverage and weak group structures.

Financial Fundamentals

The derivation from the financial statements of key indicators for assessing financial strength and performance against appropriate benchmarks.

Statement logic

  • Review of key items in financial statements
  • Key accounting methods and their uses: regulatory returns, IFRS Phases I and II; GAAP and embedded value reporting
  • Items subject to management discretion: write-downs, IFRS Fair Value hierarchy, temporary and permanent impairments, reserving for IBNR claims (non-life) and for investment guarantees (life).

Business risk

  • Investment risk: quality and liquidity of the investment portfolio, asset and liability matching, cost of investment guarantees, use of derivatives for hedging, concentration risks
  • Investment returns: inclusion of realised and unrealised gains and losses, investment return requirements of the life and non-life insurance businesses
  • Underwriting risk: assessing the quality and diversity of the underwriting portfolio, loss, expense and combined ratios
  • Non-life reserve adequacy: loss reserve development triangles, calendar year vs. accident year analysis, survival ratios etc.
  • Catastrophe and reinsurance risk: degree of reinsurance utilisation; adequacy of reinsurance cover, credit and dispute risk
  • Life insurance risks: persistency, mortality and expenses.

Case study:

Assessing investment and underwriting risk and performance for a composite insurance company.

Performance measurement

  • Diversity and stability of income: profitability measures and benchmarks
  • Embedded value techniques for measuring and analysing life profitability, profit margins on new business, European Embedded Value (EEV) and Market-Consistent Embedded Value (MCEV), key assumptions.

Financial risk

  • Liquidity: operating cash flow, liquidity of investments, liquidity shocks
  • Capital adequacy: regulatory solvency coverage; stress testing; quality and fungibility of capital; tangible vs intangible capital; simple capital measures e.g. free asset ratio, operating leverage, asset and liability leverage
  • Financial leverage, interest cover, use of hybrid capital, refinancing risk, debt servicing ability, total commitments including off-balance sheet
  • Exercise: key financial indicators for strong and weak life companies.

Case study:

Assessing leverage, solvency and liquidity for a composite insurance company.

Management and Early Warning Signals

A structured approach to assessing management; implications of the ownership structure; and early warning signals of credit deterioration.


  • Framework for assessing management, strategy and governance risk
  • Significance of ownership: mutuals, public, state and private companies.

Early warning signals

  • Recognising financial and non-financial indicators of distress
  • Accounting discrepancies: areas to check and questions to ask.


Review of the funding needs of insurance companies, how these might be met, and the potential risk mitigants for counterparties.

  • Funding needs of insurance companies
  • Hybrid capital securities: structure and type of capital issued; impact on credit standing and other concerns; regulatory and rating agency tolerances for hybrid capital
  • Insurance-linked securities: securitisation of risks and of embedded value; use of Insurance SPVs and sidecars
  • Capital structure: creditor vs. policyholder rights and the impact of ranking and structure
  • Exercise: recovery prospects for different issues and issuers.

Insurance Company Analysis at Fitch Learning

From  $3,995
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Coursalytics is an independent platform to find, compare, and book executive courses. Coursalytics is not endorsed by, sponsored by, or otherwise affiliated with any business school or university.

Full disclaimer.

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