Why a Best's Financial Strength Rating Is Important

When selecting an insurance company, it's essential that the company you're entrusting to protect your family, business, or your property is financially strong and is able to pay your claims when needed. That's why insurance companies are rated by independent credit rating agencies, which evaluate and report on the current financial strength and stability of the company.

A.M. Best issues a rating that serves as a valuable benchmark for consumers, insurance agents, financial advisors, banks and other financial institutions to help support prudent decision-making.

A.M. Best analyzes a range of components when determining a company's claims paying ability. This includes:

  • Balance sheet strength
  • Operating performance
  • Business profile
  • Enterprise risk management

Insurance companies are complex institutions that pay claims with funds acquired through the premiums paid by their customers and investment incomes. A.M. Best also evaluates their investment risks, as well as the underwriting risks, which determine the likelihood and amount of a claims payout over the life of a policy.

There are currently 10 nationally recognized statistical rating organizations (NRSROs) that the Securities and Exchange Commission (SEC) permits financial institutions to use for certain regulatory purposes, and A.M. Best is the only agency that focuses exclusively on the insurance industry. For more information about the SEC, visit https://www.sec.gov/.

The following scale outlines the ratings and descriptions assigned to insurance companies rated by A.M. Best. View our online Guide to Financial Strength Ratings for complete definitions.

Financial Strength Rating What it means
A++, A+ (Superior) Assigned to companies that have, in our opinion, a superior ability to meet their ongoing insurance obligations
A, A- (Excellent) Assigned to companies that have, in our opinion, an excellent ability to meet their ongoing insurance obligations
B++, B+ (Good) Assigned to companies that have, in our opinion, a good ability to meet their ongoing insurance obligations.
B, B- (Fair) Assigned to companies that have, in our opinion, a fair ability to meet their ongoing insurance obligations. Financial strength is vulnerable to adverse changes in underwriting and economic conditions
C++, C+ (Marginal) Assigned to companies that have, in our opinion, a marginal ability to meet their ongoing insurance obligations. Financial strength is vulnerable to adverse changes in underwriting and economic conditions.
C, C- (Weak) Assigned to companies that have, in our opinion, a weak ability to meet their ongoing insurance obligations. Financial strength is very vulnerable to adverse changes in underwriting and economic conditions.
D (Poor) Assigned to companies that have, in our opinion, a poor ability to meet their ongoing insurance obligations. Financial strength is extremely vulnerable to adverse changes in underwriting and economic conditions.
E (Under Regulatory Supervision) not applicable
F (In Liquidation) not applicable
S (Rating Suspended) not applicable

A.M. Best was founded in 1899 by Alfred M. Best with the mission to report on the financial stability of insurers and the insurance industry. It is the oldest and most widely recognized provider of ratings, financial data and news. Ratings are issued on over 3,500 companies in more than 80 countries worldwide. Best's Credit Ratings are recognized as a benchmark for assessing a rated organization's financial strength as well as the credit quality of its obligations.