Now that the UK government has had it’s financial rating downgraded by Moody’s from AAA to AA status, this has highlighted and made newsworthy the system of judging the financial stability and strength. Moody’s of course are not the only company to rate firms – Standard and Poors and A M best are also very well known firms that measure indices of this nature. But does it realistically do any harm and furthermore does anyone take any notice? From a governments perspective, yes people take notice but the powers that be will already be well aware of any governments financial situation and probable outlook. George Osborne will nonetheless be under pressure to act decisively to rectify what many believe to be an embarrassing situation. The Pound has also suffered, having slid from $1.5160 to $1.5077 in the Asian markets late on Friday afternoon (22nd February 2013), the first market to react to the news.

Insurance companies are also rated by these companies. Now the public who pay for personal lines insurance polices such as cheap taxi insurance, in all honesty probably wouldn’t give the rating of a firm any consideration when deciding which insurance policy to elect. Why? Well the perception is that all of these policies are the same and that the public are heavily protected by the Financial Services Authority. This is true to a certain extent, as long the FSA are aware of a firms difficulties and can react in time and can depend on the firms accurate reporting to the FSA of their solvency. Of course, price is a huge factor also, not just in the personal

Lines sector. The Commercial lines sector, companies who buy insurance, particularly those with a significant premium spend, do take a firms rating into consideration whether it is a cheap plumber liability policy to a firm that wants to compare fleet insurance policies. Any good advisor will also highlight ratings of a firm when delivering products to businesses as there have been well known casualties over the years notably Quinn insurance and more recently three insurance companies that have operated out of Gibraltar and who traded on FSA passports. When factoring in quotations, those firms who are not rated should come with a Health or “wealth” warning – though it is important to remember that just because an insurer is not rated, this does not necessarily mean they will go bankrupt imminently. Any firm that is rated will no doubt still provide that little bit more comfort and security.