Best Life Insurance: Am Rating Agency's Guide

AM Best is a global credit rating agency that assesses the financial strength of insurance companies and their ability to meet their obligations to policyholders. With over 120 years of experience, AM Best provides valuable insights for those seeking long-term financial security and peace of mind through life insurance policies. The company's rating system employs a letter-grade scale, with six Secure ratings and six Vulnerable ratings, to indicate an insurer's ability to meet its commitments. AM Best's evaluations are recognised by the U.S. Securities and Exchange Commission (SEC) and the National Association of Insurance Commissioners (NAIC), making it a trusted source for consumers looking to understand and compare insurance providers.

AM Best's rating definitions

AM Best is a credit rating agency that focuses exclusively on the worldwide insurance industry. It assesses the creditworthiness of insurance companies, which refers to the likelihood of the company defaulting on its obligations. AM Best's credit ratings are used by consumers, financial professionals, and investors to make informed decisions.

The company uses a ranking system to provide a quantified assessment of an insurance company's financial health. AM Best's financial strength ratings range from A++ (the highest) to B+ (secure ratings), and from B to S (vulnerable ratings), with the lowest indicating a suspended rating.

The secure ratings are as follows:

• A++ and A+: Superior ability to meet ongoing obligations to policyholders.
• A and A-: Excellent ability to meet ongoing obligations to policyholders.
• B++ and B+: Good ability to meet ongoing obligations to policyholders.

The vulnerable ratings are as follows:

• B and B-: Fair ability to meet current obligations but vulnerable to adverse changes.
• C++ and C+: Marginal ability to meet current obligations but vulnerable to adverse changes.
• C and C-: Weak ability to meet current obligations and very vulnerable to adverse changes.
• D: May not be able to meet current obligations and is highly vulnerable to adverse changes.
• E: Under regulatory supervision, no longer allowed to conduct normal insurance operations.
• F: In liquidation, either by court order or voluntary agreement.
• S: Rating suspended due to sudden and significant events affecting the company's financial health, with rating implications that cannot be evaluated due to a lack of timely or adequate information.

AM Best's rating scale

AM Best is a credit rating agency that assesses the financial strength of insurance companies. The company was founded in 1899 and is the only rating agency that focuses solely on the insurance industry. AM Best's ratings are trusted by consumers, investors, and other members of the insurance industry. The company's grades are based on a comprehensive evaluation of a company's balance sheet strength, operating performance, and business profile.

• Superior (A++, A+)
• Excellent (A, A-)
• Very Good (B++, B+)
• Fair (B, B-)
• Marginal (C++, C+)
• Weak (C, C-)
• Poor (D)
• Under Regulatory Supervision (E)
• In Liquidation (F)
• Rating Suspended (S)

The "Secure" ratings range from A++ to B+, indicating a company's ability to meet its obligations to policyholders. The "Vulnerable" ratings, from B to F, indicate a company's financial vulnerability and decreased ability to meet its obligations.

AM Best's ratings are an important tool for consumers looking to purchase insurance. The ratings provide valuable insights into an insurer's financial health and ability to pay out claims. When considering an insurance company, it is essential to look at their AM Best rating, as well as reviews from other independent rating agencies.

AM Best's rating process

AM Best is a rating agency that specialises in assessing companies in the insurance industry. It was founded in 1899 by Alfred Best and is currently located in Oldwick, New Jersey. The agency assesses a company's financial strength and claims-paying ability, which are determined by financial performance, company management, and business profile.

AM Best's rating scale is as follows:

• A++, A+ (Superior): These grades are assigned to companies with a superior ability to meet their ongoing obligations to policyholders.
• A, A- (Excellent): These grades are assigned to companies that have an excellent ability to meet their ongoing obligations to policyholders.
• B++, B+ (Very Good): These grades are assigned to companies that have a good ability to meet their ongoing obligations to policyholders.
• B, B- (Fair): These grades are assigned to companies that have a fair ability to meet their current obligations to policyholders but are financially vulnerable to adverse changes in underwriting and economic conditions.
• C++, C+ (Marginal): These grades are assigned to companies that have a marginal ability to meet their current obligations to policyholders but are financially vulnerable to adverse changes.
• C, C- (Weak): These grades are assigned to companies that have a weak ability to meet their current obligations and are financially very vulnerable to adverse changes.
• D (Poor): These grades are assigned to companies that may not be able to meet their current obligations and are financially highly vulnerable to adverse changes.
• E (Under Regulatory Supervision): These grades are assigned to companies that have been placed under a form of supervision by an insurance regulatory authority.
• F (In Liquidation): These grades are assigned to companies that have been placed under an order of liquidation by a court of law or have voluntarily agreed to liquidate.
• S (Rating Suspended): These grades are assigned to rated companies that have experienced significant events affecting their stability, and their rating implications cannot be evaluated due to a lack of information.

AM Best also uses "+" and "-" notches to express an insurer's anticipated stability. For example, a marginally stable company with a new strategy to diversify its portfolio may receive a final rating of C++ instead of C+. The agency also designates most insurance companies with an Affiliation Code (pooled, reinsured, or group) to describe their financial relationship with other insurance or non-insurance companies.

In addition to its financial strength ratings, AM Best also offers a Delegated Underwriting Authority Enterprise (DUAE) rating for third-party entities, such as general agents and underwriting agencies, that are contracted through the insurer. This rating assesses the financial stability and claims-paying ability of these entities, which are becoming increasingly important as insurance companies continue to outsource policyholder services.

AM Best's history

AM Best is a credit rating agency that focuses solely on the insurance industry. It was founded in 1899 by Alfred Best in New York City and is now located in Oldwick, New Jersey. The company has over 120 years of experience in assessing the finances and operations of insurance companies and is one of the most trusted independent third-party rating agencies.

The U.S. Securities and Exchange Commission (SEC) and the National Association of Insurance Commissioners (NAIC) have designated AM Best as a nationally recognized rating company. The company's rating system uses a letter grade scale to provide an objective assessment of a company's performance, helping consumers understand which policies best meet their needs. The ratings include a projection of the company's future outlook, which can be positive, negative, or stable.

AM Best's rating scale includes six "Secure" ratings: A++, A+ (Superior), A, A− (Excellent), and B++ and B+ (Very Good). The scale also includes six "Vulnerable" ratings: B and B- (Fair), C++ and C+ (Marginal), C and C- (Weak), D (Poor), E (Under Regulatory Supervision), and F (In Liquidation). In addition, a grade of S (Rating Suspended) is assigned when a company experiences significant events affecting its balance sheet strength or operating performance, and its rating implications cannot be evaluated due to a lack of timely or adequate information.

AM Best is the most widely accepted rating agency for insurance companies, and its ratings are often used as a standard reference for assessing a company's financial strength and creditworthiness.

AM Best's recognition

AM Best is a globally recognised credit rating agency that has been specialising in assessing insurance companies since 1899. It is the only rating agency that focuses solely on the insurance industry.

The company's ratings are based on a letter-grading system, ranging from A++ to F, with each grade also having a notch (or an additional "+") to indicate its strength within that grade. For example, an A+ company with an outstanding ability to meet its obligations would be categorised as A++. The grades are based on a company's ability to meet its short-term, long-term, and ongoing financial obligations.

AM Best's ratings are particularly relevant to life insurance as policyholders may need to wait decades for their insurance claims to be paid out. Therefore, it is important to know that the insurance company will be in good financial standing in the long term.

In addition to its financial strength ratings, AM Best also provides an opinion based on a comprehensive quantitative and qualitative evaluation of a company's balance sheet strength, operating performance, and business profile. This includes the company's claims-paying ability and the credit quality of its obligations.

Frequently asked questions