Summary of Rating Disclosure Requirements
Written Disclosure before Entering or Renewing a Contract of Insurance
An insurer or an insurance intermediary must, before entering into or renewing a contract of insurance, disclose in writing to the insured:
- The insurer's current rating and the date on which the rating was given; and
- The rating scale of which the insurer's rating forms part; and
- Any credit watch warning relating to the insurer's rating, the date on which it was given and the reasons for it; or
- That the insurer has elected not to be rated and is not required to have a rating.
Written Disclosure by Intermediary Effecting Insurance Outside New Zealand
An insurance intermediary must, before arranging or renewing a contract of insurance or co-insurance with an insurer that does not carry on business in New Zealand, disclose in writing to the insured either:
- The most recent rating of the insurer given by an agency recognised by the insurance industry as a competent agency, and the date of the rating; and
- The relevant rating scale; and
- Any credit watch warning, the date on which it was given, and the reasons for it; or
- That no such rating is available and the reasons for this.
An intermediary, who arranges a contract of co-insurance with 2 or more overseas insurers, is not required to disclose the above matters if, before the contracts are entered into or renewed, the intermediary discloses in writing that:
- On account of the number of insurers the above matters are not being disclosed.
Disclosure Where Impracticable to Make Prior Written Disclosure
If it is not reasonably practicable for an insurer or an insurance intermediary to make disclosure in writing before a contract is entered into or renewed, the insurer or intermediary must:
- Make oral disclosure of all the above matters, except for the insurer's rating scale, before the contract is entered into or renewed; and
- Make written disclosure of all matter as soon as practicable.
Failure to Make Disclosure
Failure by an insurer or an intermediary to comply with the requirement to make any disclosure gives the insured the right to cancel the insurance contract in writing within 20 working days after the contract was entered into or renewed.
Examples of Written Disclosure
All written disclosures must be made clearly and prominently. A written disclosure may state, for example:
- XYZ Insurance Ltd has an AA Very Strong claims paying rating given by Standard & Poor's (Australia) Pty Ltd on 24 November 1995. The Rating scale is:
| AAA |
(Extremely Strong) |
| AA+ |
(Very Strong) |
| AA |
(Very Strong) |
| AA- |
(Very Strong) |
| A+ |
(Strong) |
| A |
(Strong) |
| A- |
(Strong) |
| BBB+ |
(Good) |
| BBB |
(Good) |
| BBB- |
(Good) |
| BB+ |
(Marginal) |
| BB |
(Marginal) |
| BB- |
(Marginal) |
| B+ |
(Weak) |
| B |
(Weak) |
| B- |
(Weak) |
| CCC |
(Very Weak) |
| CC |
(Extremely Weak |
| R |
(Regulatory Action) |
- XYZ Insurance Ltd has an A+ Strong claims paying rating given by Fitch Australia Pty Ltd on 24 August 2004. The Rating scale is:
| AAA |
(Exceptionally Strong) |
| AA+ |
(Very Strong) |
| AA |
(Very Strong) |
| AA- |
(Very Strong) |
| A+ |
(Strong) |
| A |
(Strong) |
| A- |
(Strong) |
| BBB+ |
(Good) |
| BBB |
(Good) |
| BBB- |
(Good) |
| BB+ |
(Moderately Weak) |
| BB |
(Moderately Weak) |
| BB- |
(Moderately Weak) |
| B+ |
(Weak) |
| B |
(Weak) |
| B- |
(Weak) |
| CCC |
(Very Weak) |
| CC |
(Very Weak |
| C |
(Very Weak) |
| DDD |
(Distressed) |
| DD |
(Distressed) |
| D |
(Distressed) |
- XYZ Insurance Ltd has a C Weak claims paying rating given by A.M. Best Company, Inc on 24 November 1995. The rating scale is:
| A++ |
(Superior) |
| A+ |
(Superior) |
| A |
(Excellent) |
| A- |
(Excellent) |
| B++ |
(Very Good) |
| B+ |
(Very Good) |
| B |
(Fair) |
| B- |
(Fair) |
| C++ |
(Marginal) |
| C+ |
(Marginal) |
| C |
(Weak) |
| C- |
(Weak) |
| D |
(Poor) |
| E |
(Under Supervision) |
| F |
(In Liquidation) |
On 20 June 1996 a credit watch warning was issued in relation to the rating. The reasons for the credit watch warning are that…
- XYZ Insurance Ltd has elected not to have a rating in accordance with the Insurance Companies (Ratings and Inspections) Act 1994, and is not required to have a rating.
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