The A. M. Best Insurance Ratings Explained

By Andrew Egenes   |  07/18/2017

We’ve all shopped for insurance at some point in our lives. Whether a personal auto policy or commercial General Liability policy, if you research insurance then you’re going to come across A. M. Best’s insurance ratings. But what exactly are these ratings, what factors are evaluated to determine each rating, and what do they mean to a consumer? Let’s take a look.


A.M. Best is an American credit ratings firm that has been around for more than one hundred years and is a Nationally Recognized Statistical Rating Organization or NRSRO. This means the U.S. federal government has certified their ratings and authorized the to be used by other financial institutions for regulatory purposes. In other words, the ratings from Best are trustworthy. They’re also one of 10 current NRSROs but, unlike the 9 others, have chosen to limit their credit ratings to the insurance industry with a primary focus on grading an insurance companies’ financial strength and likelihood to pay claims. In addition to issuing their well known letter-based grades for insurance companies, A.M. Best also rates the various financial products sold by insurance companies including bonds and securities.




The Rating Scale

When evaluating an insurance carrier or one of their financial products, A.M. Best considers a number of financial indicators obtained through a detailed analysis of the carrier’s balance sheet and other financial disclosures. Best also takes into account the strength of management, any established growth plans, and overall operational history. The result of the analysis is a letter-based grade from one of two categories. The presence of plus or minus signs next to the letter rating signals whether the company being rated is at the top or bottom of the class.

The Secure Rating Class

Rating Meaning
A++, A+ “Superior” — The Highest Available Rating
A, A− “Excellent”
B++, B+ “Good” — The Lowest Available Secure Rating

The Vulnerable Rating Class

Rating Meaning
B, B− “Fair” — The Highest Available Vulnerable Rating
C++, C+ “Marginal”
C, C− “Weak”
D “Poor”
E “Currently Under Regulatory Supervision”
F “Currently In Liquidation”
S “Rating Suspended” — The Lowest Available Vulnerable Rating

It’s also important to note that not every insurance company has received a rating from A.M. Best. In fact, many carriers haven’t been rated but this is not an indication that they’re bad or should necessarily be avoided. If you come across an insurance company or financial product with a “Not Rated” or “NR” rating, don’t be overly concerned. Finally, ratings are updated often as new information becomes available, changes in company leadership occur, or certain financial circumstances shift. So be sure to track the ratings of the carriers who issue your coverage throughout the life of those policies.

What It All Means

When taking into consideration a particular insurance carrier’s A.M. Best rating, you need to understand that the ratings are a forward-looking, or predictive, opinion about what the overall financial strength of the firm being evaluated will be in the future. While Best’s opinion is based on factual data, the opinion itself is not designed to be interpreted as fact rather simply as an objective third-party evaluation that should be combined with other research before the decision to engage with a particular company is made. The exceptions to this rule are the “F” and “S” ratings within the vulnerable class in the table above which represent actual and current negative company statuses.

As a personal or commercial consumer of insurance, arguably the most important factor when choosing a carrier to work with is whether or not they’ll be able to pay your claim if you have one. This is primarily what these ratings are designed to help predict. It’s also the reason that Layr chooses only to work with secure A.M. Best A++, A+, or A rated companies. While our customers might be able to save a little bit of money buying from a lower vulnerable rated carrier, we fundamentally don’t believe in selling a product as critically important as insurance from providers that have been deemed as vulnerable by one of the oldest and most trusted credit raters in the world.