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Why the rating and solvency of your underwriter matters
When you buy GAP (Guaranteed Asset Protection) insurance, you're relying on a promise: if your vehicle is written off, the insurer will pay the difference between what your motor insurer pays and what you originally paid, owed, or need to replace the car.
That promise only has value if the insurer can keep it. The financial strength of the company underwriting your policy determines how confident you can be that a claim years down the line will actually be honoured.
Two things matter most:
- External credit ratings (for example, "A-rated")
- Solvency ratios (the capital buffer an insurer holds under UK regulation).
What does "A-rated" mean?
An 'A' rating is awarded by credit agencies such as Standard & Poor's, Fitch, or AM Best. It indicates that an insurer has been independently assessed for its financial stability, claims history, risk exposure, governance, and overall resilience, and has been awarded one of the highest ratings possible.
An unrated insurer hasn't gone through this process publicly. That doesn't mean it's automatically weak, but it does mean there's less independent verification. Some companies avoid applying for ratings to save costs, but the trade-off is reduced transparency and potential loss of customer confidence.
What this means for you:
- With a rated insurer, an independent body has tested its ability to pay claims.
- With an unrated insurer, you may not have the same assurance.
In uncertain times, that difference matters. Whilst FSCS protection may exist for both, that scheme offers protection up to 90% of your claim, and there can be months of delays before a claim is processed. Not ideal.
Solvency ratios: capital strength in numbers
In the UK, insurers are required to comply with Solvency II rules, which are overseen by the Prudential Regulation Authority (PRA). They must hold enough capital to withstand extreme stress scenarios and report this publicly.
Key terms:
- Own funds – the insurer's capital available to absorb losses.
- Solvency Capital Requirement (SCR) – the minimum capital required to cover a 1-in-200-year event.
- Solvency ratio – own funds ÷ SCR.
How to consider solvency ratios:
- 200%+: Very strong. The insurer has at least double the required capital.
- 150–200%: Adequate but with less headroom.
- Below 150%: Thinner buffer, greater regulatory concern, pressure to raise capital or limit new business.
- Below MCR (minimum requirement): Regulatory intervention, run-off, or worse.
For customers, a strong ratio means more confidence that the insurer can withstand unexpected losses and still pay claims.
The current economic backdrop
Why does all this matter even more now? Because insurers are under pressure:
- Inflation has pushed up repair and replacement costs.
- Higher interest rates affect investment portfolios.
- Supply-chain delays lengthen and increase repair costs.
- Regulatory scrutiny is tighter, with the PRA reviewing solvency and resilience more closely.
In this climate, it's not enough to rely on brand or name recognition. The financial standing of the insurer really counts.
Indeed, we have seen some unrated insurers in the UK GAP Insurance market slip below the 150% solvency mark this year. Bigger, rated insurers, with higher solvency ratios, may have more resilience to changes than unrated ones.
That's why, from October 2025, Total Loss GAP will only provide new GAP Insurance policies backed by A-rated insurers.
Check out the current insurers used by Total Loss GAP
What this means for you
By limiting our GAP Insurance panel to 'A' rated insurers, you get:
- Independent assurance of financial strength.
- Transparency and accountability: their rating and solvency are publicly available.
- Greater confidence that your claim will be paid quickly and in full.
- Reduced risk of disruption if an insurer struggles financially.
What you should check as a customer
If you're comparing GAP policies, it's worth asking:
- Who underwrites the policy?
- Do they publish a rating from a recognised agency?
- What is their latest solvency ratio?
- Are they authorised and covered by the UK's Financial Services Compensation Scheme (FSCS)?
FAQs
If the insurer fails, how am I protected?
Most UK GAP policies are covered by the FSCS, which can protect up to 90% of the claim amount. The FSCS can also arrange a transfer to a new insurer, though this isn't guaranteed. In some cases, such as LAMP Insurance in 2019, policies were cancelled with refunds instead.
How often does an insurance company fail?
It has happened more often than you may think, and Total Loss GAP saw one insurer we used (Qudos Insurance a/s) go into insolvency in 2018. We worked closely with our distributor and the FSCS to successfully transfer our policyholders to a new insurer. However, the entire process took many months and should be considered a last resort.
(See Car and Van Insurance firm goes into administration)
Can an 'A' rated insurer still fail?
Yes, no insurer is risk-free. But rated insurers are usually larger, more diversified, and better capitalised, making failure far less likely.
Do all insurers carry FSCS protection?
No. Some "non-admitted" insurers operating in the UK are not covered. Always check.
Does FSCS cover the same as a normal claim?
Not quite. Payouts are capped at 90% and can take longer to process, which could delay replacing your car or settling finance. Not every policyholder may be eligible, either.
In summary
Your GAP policy is only as strong as the insurer backing it. A cheaper price, better features and a recognisable brand can all count for nothing if the insurer fails.
By choosing A-rated insurers with robust solvency ratios (ideally 200% or more), you significantly reduce the risk of failure, delays, or shortfalls in the event of an unexpected occurrence.
That's why we've made the decision to place all new GAP Insurance policies with A-rated insurers only, so you can buy with confidence, knowing your cover is supported by the financial strength you can trust.