Risk can be found in a variety of places throughout the real estate space, and the insurance companies that provide you with professional, cyber, and general liability coverage are not excluded from risk. Insurance company ratings help real estate agents determine which insurance company to use, as companies with higher ratings are generally more secure and more likely to pay out on debts and claims.
What to Know About Rating Companies
Several different credit rating companies for insurance companies exist, with some of the most notable being AM Best, Moody’s, and S&P Global Ratings (S&P)1. These ratings allow individuals to assess how well an insurance company can meet its obligations to its insureds, such as paying out claims.2
The main risk with insurance companies that have lower ratings is not having claims or other obligations paid, leaving the real estate agent or brokerage in a state of significant financial loss and legal issues. Additionally, insurance companies that are not financially strong may enact policy exclusions or wording that restrict coverage to avoid paying claims that they normally would have.
Strong overall ratings, especially those that remain strong year over year, indicate that an insurance company is in a much better position to fulfill obligations and claims, and it can indicate that the company has the long-term interests of its insureds in mind.3
How Claims Can Affect Your Career
Dealing with a claim as a real estate agent can be incredibly detrimental to your career and business, even if the claim is ultimately found to be baseless. Negative effects of claims include financial tolls, such as damages, settlements, and legal costs outside of what is covered by your errors and omissions policy.
Additionally, real estate agents could face a loss of business leading to further financial impacts and, depending on the severity of the claim and the terms of a potential settlement, an agent could lose their license, their reputation in the community, and deal with more expensive insurance premiums moving forward.
Why Monitor Insurance Company Ratings?
Insurance companies with consistently strong financial ratings are less likely to cut corners or save on expenses that would have otherwise been in the best interest of the insureds. So, while it can seem tempting to save money and purchase insurance through a lower-rated, yet cheaper overall, insurance company, this can be a much riskier financial move when it comes to actually getting claims paid and insurance obligations met.
It’s also important to note that many real estate brokerages are part of a franchise group. These franchisors, the entity that grants the franchise rights, will generally require minimum insurance requirements to be met in something called a Franchise Disclosure Document (FDD); franchises must read and agree to the FDD as part of the franchise agreement. Requiring this protects both you and the franchisor. If an insurance carrier goes insolvent, both the franchisor and the franchisee may get pulled into claim payments and lawsuits.
Typically, these franchisors will require both a certain limit of applicable insurance coverage for franchises, in addition to requiring that the insurance company the franchise is working with carries a minimum rating. You can expect most franchisor requirements for insurance carrier ratings to be A or A+ with AM Best, Aa with Moody’s, and AA with S&P.
Takeaways to Protect Yourself
Whether your real estate brokerage is part of a franchise or independent, it’s essential to take steps to protect yourself and your business from financial risk. You can do this by investing in insurance from a financially stable and reliable company, and you should always check ratings before investing in a coverage policy.
Things to consider when reviewing insurance companies include:
- The company’s overall rating
- How long the insurance company has been actively writing insurance
- The financial ratings of the insurance company over time; check multiple years and see if the rating changes year to year
- Any FDD requirements for an insurance carrier that you may have agreed to and be contractually required to uphold
Taking your time and reviewing insurance ratings can save you from financial risk and ensure that your business is protected from debts, claims, and financial loss.
Pearl Insurance is committed to helping you manage your risk. Our carrier, AXA XL, rated A+ (Superior) on AM Best, has been partnering with Pearl for more than 20 years, providing you with the best E&O protection. If you have questions about E&O insurance or the claims process, schedule a time to talk to our experts.
Ready to get a quote for your E&O insurance? Give our experts a call at (855) 465-0200 or click on the button below to fill out a quote form.
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1“Why an Insurance Company’s Credit Rating Matters.” Cragin & Pike, 2023.
2“The Importance of Understanding Insurance Carrier Financial Ratings.” Big I, 2025.
3 “Why Insurance Financial Strength Ratings Matter.” New York Life, 2025.
