The Hidden Truth Behind CNBC’s “Must‑Have” Insurers: Why Ratings Are a Smoke‑and‑Mirrors Game

Opening salvo: If you think CNBC’s shiny "must-have" insurer list is a beacon of financial safety, you’re probably still buying the same brand-name cereal because the box looks prettier. The reality is that the headline-grabbing PR machine rarely reflects the numbers that matter when a claim lands on your doorstep. In 2026, the hidden balance sheets tell a very different story for anyone who actually pays the premiums.

1. Rating Trends Are a Mirage

Key Takeaways

• Short-term accounting maneuvers can inflate A.M. Best scores.
• Investors should track core capital ratios, not headline ratings.
• Many insurers improve ratings after a single profitable quarter, then slip back.

When CNBC celebrates a jump from “A” to “A+” for an insurer, the story they omit is that the boost often stems from a one-time reinsurance recoverable rather than a lasting capital infusion. Take the case of UnitedHealth Group’s subsidiary, which saw its A.M. Best rating rise to A+ in Q2 2024 after a $1.2 billion retroactive reinsurance settlement. The underlying risk-based capital (RBC) ratio barely moved, staying at 115% of the regulatory minimum. In contrast, the same company’s net written premium grew only 2% year-over-year, suggesting the rating upgrade was a cosmetic fix.

Another example is Progressive’s 2023 rating surge from A to A+. The upgrade coincided with a temporary 8% dip in its loss-adjusted loss ratio, a dip that vanished once the company’s catastrophe exposure from the Midwest tornado season was fully accounted for. A.M. Best’s methodology gives heavy weight to the most recent quarter, allowing insurers to “window-dress” performance.

Policyholders who rely solely on these upward trends may be walking into a house of cards. A deeper look at the Solvency II capital adequacy ratio (CAR) shows that insurers with the most eye-catching rating climbs still hovered near the 150% threshold - barely a cushion against a severe market shock.

Transition: If rating fireworks are just smoke, what about the very engine that powers those ratings?

2. A.M. Best’s Methodology Is Outdated

A.M. Best still anchors its star system to legacy metrics such as the combined ratio and the surplus to premium ratio. Those numbers were useful in a world where climate change and cyber risk were peripheral. In 2025, the global average cyber-related insurance loss reached $45 billion, a 27% increase over 2023, according to the Allianz Global Corporate & Specialty report. Yet the rating agency’s model treats cyber exposure as a sub-line of general liability, diluting its impact on the overall rating.

Similarly, climate-related liabilities have exploded. The National Association of Insurance Commissioners (NAIC) recorded $28 billion in hurricane losses in the United States in 2024 alone - up 15% from the previous year. A.M. Best’s capital models still rely on historical loss data that predates the intensification of Category 4 and 5 storms, under-estimating the capital needed to cover future events.

Because the methodology does not incorporate forward-looking stress scenarios for climate or cyber, insurers can appear “stable” on paper while their actual risk profile is deteriorating. Zurich Insurance, for instance, retained an A+ rating in 2024 despite a 9% increase in its climate-adjusted loss reserves. The agency’s lag in adjusting its metrics means investors are left with a rating that reflects the past, not the present.

Transition: Outdated metrics are one thing; reckless balance sheets are another.

3. The “Safe” Insurers Are Overleveraged

Debt is a double-edged sword. While leverage can boost return on equity, excessive borrowing erodes an insurer’s ability to meet claim obligations during a stress event. In 2024, the average debt-to-equity ratio for the top ten U.S. property-casualty carriers rose to 1.9, up from 1.5 in 2020, according to the Insurance Information Institute. That level would raise eyebrows among hedge fund managers, yet the same carriers proudly display A.M. Best “A” ratings.

Consider Allstate. Its total liabilities reached $143 billion at year-end 2023, with $78 billion classified as debt. The company’s leverage ratio of 2.1 places it in the top quartile for debt load among its peers. When a severe weather event hit the Gulf Coast in 2023, Allstate’s loss ratio spiked to 78%, forcing it to tap its revolving credit facility for $5 billion - an amount that was not reflected in its rating outlook.

Even seemingly “solid” carriers like State Farm are not immune. State Farm’s 2023 annual report disclosed a $9 billion increase in long-term debt, primarily issued to fund a $12 billion acquisition of a tech-driven underwriting platform. The move inflated its net income by 4% but left its debt-service coverage ratio at a precarious 1.3x. A decline in investment income - a realistic scenario given the Federal Reserve’s tightening cycle - could push that ratio below 1.0, jeopardizing claim-paying capacity.

Transition: Leverage may be hidden in the fine print, but the media loves to spotlight growth. Let’s see what that spotlight is really illuminating.

4. Media Hype Masks Emerging Risks

When CNBC runs a segment on “record growth” for an insurer, the underlying underwriting losses are often buried in footnotes. In 2024, the cyber-insurance segment of AIG posted a 23% increase in gross written premium, yet its loss ratio climbed to 92%, according to the company’s SEC filing. The headline was “AIG’s cyber line soars,” but the reality was that the line was bleeding cash faster than any traditional property line.

Pandemic-style exposures are also slipping through the cracks. The 2025 Lloyd’s of London market report highlighted that “pandemic business interruption” claims surged by 48% in the first half of the year, amounting to $3.2 billion in payouts. Yet mainstream coverage focused on the rebound in travel insurance sales, ignoring the mounting liability reserves that insurers now must hold.

These hidden losses accumulate quietly. A 2023 study by the Risk Management Association found that insurers with more than 10% of their portfolio in emerging perils (cyber, pandemic, climate) saw an average five-year earnings volatility of 7.8%, compared with 3.2% for carriers focused on legacy lines. The volatility translates directly into policyholder risk: higher premiums, reduced claim settlements, and in worst-case scenarios, insolvency.

Transition: If the media’s glow is blinding, the next logical question is how loyal customers become collateral damage.

5. Policyholder Loyalty Is a Liability

Ever wonder why you stay with the same insurer for decades? It’s not always because they’re the best; it’s often because the switching cost - both financial and emotional - creates a prison. A 2022 J.D. Power survey showed that 61% of auto-policyholders would stay with their current insurer even after a rate increase, citing “trust” and “familiarity.” That trust can become a liability when the insurer’s credit outlook deteriorates.

Take the case of MetLife. In early 2024, A.M. Best placed a negative outlook on its “A” rating after a series of underwriting losses in its Asian life segment. Yet 78% of MetLife’s U.S. policyholders remained unchanged through 2025, according to internal retention data released under a Freedom of Information Act request. Those policyholders were effectively locked into contracts that were increasingly likely to be backed by a weakening balance sheet.

When an insurer’s financial health declines, policyholders often face higher renewal rates or, worse, reduced claim payouts. The 2023 “Policyholder Harm Report” from the Consumer Federation of America documented 4,216 complaints about delayed claim payments from carriers that had been downgraded in the previous two years. Loyalty, in this context, is not a virtue - it is a hidden cost.

Transition: Loyalty may trap you, but paying a premium for a “top pick” can bleed you dry. Let’s unpack that price tag.

6. The Real Cost of “Top Picks”

Choosing a carrier because it appeared on a CNBC “top picks” list can be pricey. A 2024 analysis by the National Association of Insurance Commissioners showed that the average premium for insurers in the top-five media list was 12% higher than the market median for comparable coverage. The premium premium is the price you pay for the illusion of prestige.

Behind the higher price tag is a risk profile that is deteriorating faster than the headline suggests. For example, Chubb’s 2023 rating remained at A+ despite a 14% increase in its catastrophe reserve requirements due to a series of severe wildfires in California. The company’s earnings per share fell from $6.20 in 2022 to $5.48 in 2023, a 12% decline that was largely invisible in the media’s celebration of its “A+ strength.”

Moreover, the “top pick” narrative can mask pricing tactics that shift risk onto the consumer. A 2025 study by the University of Pennsylvania’s Wharton School found that insurers featured in high-visibility media often embed “experience rating” clauses that increase premiums after a single large claim - a practice that hurts policyholders the most.

Transition: Armed with these insights, what should the savvy policyholder actually do?

7. Bottom Line: What Policyholders Should Do Today

First, build your own rating watch-list. Look beyond A.M. Best and track the Risk-Based Capital (RBC) ratio, debt-to-equity, and combined loss ratio over multiple quarters. Second, diversify. Spread coverage across at least three carriers with differing risk appetites - one that focuses on traditional lines, one that specializes in cyber, and a third that excels in climate-adjusted underwriting.

Third, treat agency reports as early warning systems, not marketing copy. When a broker highlights a “new product” that promises “unprecedented coverage,” ask for the underlying loss reserve calculations. Finally, consider captive insurance or self-funded structures if your risk profile justifies it; they provide greater control over capital and claim handling.

In 2024, insurers with an A.M. Best rating of A or higher but an RBC ratio below 120% experienced an average 3.4% decline in claim settlement speed, according to the NAIC.

The uncomfortable truth? The next headline-making insurer could be the one that fails first, and it will be the policyholders - not the analysts - who feel the impact.

Q? How can I tell if a rating upgrade is genuine?

A. Look for sustained improvements in risk-based capital, loss ratios, and debt levels over at least two quarters. One-off gains from reinsurance recoveries are not enough.

Q? Should I ignore A.M. Best ratings altogether?

A. No. Use them as a starting point, but supplement with independent metrics like Solvency II CAR, RBC, and underwriting loss trends.

Q? What are the biggest emerging risks insurers are overlooking?

A. Cyber liability, climate-related catastrophe exposure, and pandemic-style business interruption are the three risk vectors growing fastest and are often under-weighted in traditional rating models.

Q? How can I diversify my insurance coverage effectively?

A. Choose carriers with different underwriting focuses - one traditional property-casualty, one cyber-specialist, and one climate-adjusted insurer. This spreads risk across varied loss drivers.

Q? Are higher premiums from “top pick” insurers justified?

A. Not always. The premium premium often reflects brand prestige, not superior risk management. Compare loss ratios and reserve adequacy to gauge true value.