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Vault Insurance 101: What an 'A+' Rating Means for Your Bullion Custodian

UUnknown

2026-02-12

10 min read

Understand what an AM Best A+ insurer means for your vault — and use our practical checklist to assess coverage limits, sublimits, reinsurance and red flags.

Vault Insurance 101: What an 'A+' Rating Means for Your Bullion Custodian

If you hold significant physical gold or silver, the single biggest question isn't where it sits — it's whether the insurer backing that vault will actually pay when the worst happens. Recent moves in the insurance market, including AM Best's January 2026 upgrade of Michigan Millers Mutual to an A+ Financial Strength Rating, have put vault insurance back in the spotlight. For investors, that upgrade is a prompt to move beyond headlines and run disciplined insurance due diligence on custodians.

The short answer investors need right now

Ratings like AM Best's A+ matter because they reflect an insurer's ability to meet policy obligations. But a strong insurer rating is only one piece of a complete picture. You must layer policy language, coverage limits, reinsurance structure, aggregate caps, and the custodian's contractual promises into a single assessment of counterparty risk.

Why the Michigan Millers/AM Best story matters to bullion owners (2026 context)

On Jan. 16, 2026, AM Best upgraded Michigan Millers Mutual's Financial Strength Rating to A+ (Superior) and improved its issuer credit rating to aa-, citing strongest balance sheet strength and participation in a Western National pooling agreement. That shift illustrates two key trends shaping vault insurance in 2026:

Insurers are consolidating and using pooling/reinsurance structures to absorb large, concentrated risks (relevant to mass claims on vault networks).
Regulatory scrutiny and capitalization standards have tightened post-2024–25 market volatility, so rating upgrades/downgrades now more directly influence premium pricing and coverage market capacity.

What an A+ insurer rating actually tells you

Ratings agencies like AM Best evaluate balance-sheet strength, operating results, business profile and enterprise risk management. An A+ FSR signals a superior ability to meet claims under normal and many stressed scenarios — but it does not guarantee full recovery for every policyholder in every event. Here's how to read the signal:

Positive: Strong capitalization, conservative reserving and credible reinsurance links (e.g., Western National participation) reduce insurer default probability.
But: Ratings don't show the fine print — sublimits, exclusions (war, nuclear, cyber), aggregate caps, or who the policy actually protects.

Key insurance concepts every investor must check

Before assigning large allocations to a custodian, make sure you or your advisor verify these policy elements. Each point below includes why it matters and what to look for in documentation.

1. Policy holder vs. named insured

Who is the policyholder? Many vault policies insure the vault operator, not individual clients. If the policyholder is the operator, payouts may flow to the operator, not directly to clients. Ask for evidence that policies either name clients as additional insureds or provide a contractual trust arrangement guaranteeing client recoveries.

2. Per-occurrence and aggregate limits

Per-occurrence limit is the maximum the insurer will pay for one event. Aggregate limit caps total payouts over the policy period. A custodian can have a $500M per-occurrence limit but a $200M aggregate—meaning a single large claim might be covered, but multiple simultaneous losses could exhaust the aggregate and leave clients exposed.

3. Sublimits and per-client caps

Policies can include sublimits that limit payment by type of asset (coins vs. bars), by client, or by cause. Ask: is there a per-client cap? If so, how is it calculated? A per-client cap of $5M on a vault storing $1B in client assets would be a red flag for institutional and high-net-worth investors.

4. Valuation basis and settlement terms

On a claim, does the insurer pay market value at time of loss (spot price) or a fixed bullion schedule? Is there a mechanism for price changes between discovery and settlement? Also check currency and timing of payout — long settlement windows can create liquidity risk for you.

5. Exclusions: war, terrorism, nuclear, cyber and government seizure

Expect exclusions. The critical question is whether the custodian supplements the policy with special coverages (political risk insurance, kidnap & ransom, cyber extensions) or contingency plans for uninsured perils.

6. Reinsurance and pooling

Top-level ratings often rely on reinsurance and pooling. Ask for details on the reinsurance program — names and ratings of reinsurers, quota-share vs excess-of-loss structure, and any pooling affiliates. The Michigan Millers case shows how pooling with Western National lifted capacity — but pooling also creates concentration exposures if the pooling group suffers a systemic event.

7. Transit and shipping coverage

Does the vault's coverage include inbound/outbound transport or only on-premises losses? If transport is separate, who pays and what are the limits? Many thefts occur during transit; insured transport riders are essential.

8. Deductibles and wait periods

Large deductibles can shift first-loss risk to the vault operator or, indirectly, to clients. Confirm exact deductible amounts and whether they are per-claim, per-kg, or percentage-based.

9. Claims handling and dispute resolution

Speed and transparency of claims handling matter. Ask for documented claims procedures, past claims history (redacted), average time to settlement, and whether disputes go to arbitration or local courts. The presence of an independent adjuster with bullion expertise is a positive sign.

A practical custodian checklist — what to ask and demand

Use this checklist in calls or RFPs. Store the custodian's responses and policy excerpts in due-diligence files.

Provide the full insurance binder and a redacted sample policy showing declarations, endorsements, and schedule of limits.
Identify the named insured(s) and confirm whether clients are additional insureds or beneficiaries.
Confirm per-occurrence, per-client, and aggregate limits. Ask for an example showing how a $100M loss would be allocated across clients.
List all sublimits, exclusions and territories excluded from coverage.
Provide names and AM Best (or equivalent) ratings for reinsurers and any pooling partners.
Show historical claims experience (summary level) for the past 5 years and largest single loss paid.
Verify transit insurance terms for insured movements to and from the vault, including whether insured couriers are used and tracking protocols.
Confirm policy deductible structures and who bears the deductible — operator or insured clients?
Document whether assets are segregated (allocated) or pooled and the implications in the event of custodian insolvency.
Ask whether the policy covers business interruption or replacement costs in extreme loss scenarios.
Require an indemnity clause or escrow of claim proceeds to a trust if the policyholder is the operator (negotiable but important for large holdings).

Red flags that should trigger escalation

Not all custodians are equal. Escalate internal approval and consider shifting exposure if you see any of the following:

Policy binder absent or only a summary provided (no full policy text).
Per-client cap smaller than your holding value — e.g., you hold $10M but per-client limit is $2M.
Unrated or poorly rated insurers in the chain without adequate reinsurance from rated carriers.
Large aggregate limits that are easily exhausted in a single event affecting multiple sites.
Rehypothecation allowed without client consent or inadequate segregation language.
No transit coverage or uninsurable transfer exposure when moving bullion between vaults.
Opaque claims history, slow settlement times, or disputes routed to distant jurisdictions with weak enforcement.

Practical examples and scenarios (real-world thinking)

Below are two concise scenarios that show how rating, limits and contract clauses combine into outcome variance.

Scenario A: Rated insurer, weak contract language

Custodian uses an A+ rated insurer and advertises "fully insured" storage. However, the insurer's policy names the custodian only and has a per-client cap of $1M. A theft destroys $50M in client metal in one event. The insurer pays the custodian up to $1M per client and the remaining loss is held by the custodian, whose balance sheet may be insufficient. Result: insured label but material client loss.

Scenario B: Lower-rated insurer, strong program design

Custodian uses a B++ carrier but supplements with a robust pooling and reinsurance program, names clients as additional insureds via endorsement, and secures a $200M per-occurrence limit with no restrictive per-client caps. In a $50M single-event loss, the reinsurers step in and settle promptly. Result: lower carrier rating offset by program structure and client-level protection.

Advanced strategies for minimizing counterparty and insurance risk (2026)

These tactics reflect 2026 market developments — tighter reinsurer capacity, increased cyber risk, and growth in tokenized and syndicated gold products.

Segregation and allocation: Prefer fully allocated, segregated storage over pooled models when possible. Allocation reduces claim complexity in insolvency scenarios.
Multiple custodians: Diversify across jurisdictions and vault networks to avoid single-event concentration risk. Use different insurers and transport corridors.
Demand policy sighting and endorsements: Request to be named as loss payee or additional insured. Insist on endorsements that limit insurer recourse to the custodian only.
Use insured transport with GPS and dual-control logistics: Ensure transit policies and protocols are contractually enforced.
Consider captive insurance or industry pools: For large institutional holders, captive programs can secure tailored coverage with predictable pricing, but require careful capital analysis. See examples of alternative market structures such as industry pooling and dealer programs.
Tokenized holdings due diligence: If buying tokenized gold, verify the custodian of the physical metal and its insurance program — token ownership does not equal legal title to insured metal unless defined in the arrangement.

Taxation and storage choices — implications for insurance

Your storage jurisdiction affects insurance and tax outcomes. For example, certain EU/UK vaults have well-developed insured networks and clear VAT/tax handling for investment gold; US custody may interact with state insurance codes. In 2026, regulators increasingly want insurers to disclose systemic exposures tied to bullion markets — this can change premiums and availability by jurisdiction.

Request: full insurance policy and endorsements.
Confirm: named insureds and additional insured status for clients.
Verify: per-occurrence, per-client, and aggregate limits.
Confirm: valuation basis at claim and settlement timeline.
Ask: names and ratings of reinsurers and pooling partners.
Confirm: transit coverage and who pays.
Verify: segregation vs pooled treatment of assets.
Obtain: documented claims process and past claims examples.

Final takeaway — how to think about an insurer's A+ rating

An AM Best A+ upgrade (like Michigan Millers in Jan. 2026) is a useful signal of insurer strength, but it should trigger a second, harder look — not a rubber-stamp. The practical investor decision is not "Is the insurer rated A+?" but "Does the insurance program and custodian contract actually protect my economic interest in reasonable loss scenarios?"

Strong ratings reduce one axis of counterparty risk. Smart documentation, adequate limits, client-level protections and operational controls remove the others.

Actionable next steps

Download and complete the custodian checklist above for any vault holding more than 1% of your investable portfolio.
Request the full binder and endorsements from custodians and compare line-by-line — don’t accept summaries.
Get legal review focused on naming conventions, sublimits, and claims mechanics — not just pricing.
If holdings are material, consider splitting across at least two custodians and jurisdictions and require audited, allocated storage.

Call to action

If you’re evaluating custodians this quarter, start with a documented request: ask each provider to supply the full insurance binder, reinsurer names and ratings, and a written statement on client-level protections. If you want a ready-to-use version of the checklist in editable form or an expert review of a vault policy, subscribe to our premium due-diligence pack or contact our analyst team for a policy audit.

Protecting bullion is not just about where you store it — it’s about how the insurer, reinsurers, and contract language work together when you need them most. Make your next custodian decision with the checklist above — not a glossy brochure.

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