Legal & Regulatory

AM Best Rating

AM Best ratings are the insurance industry's leading measure of insurer financial strength, with ratings ranging from A++ (Superior) to D (Poor), used by consumers, brokers, and regulators to assess carrier stability.

Last reviewed: May 2026 · Editorial methodology

Definition

AM Best is a global credit rating agency specializing in the insurance industry, and its Financial Strength Ratings (FSR) are the most widely recognized measure of an insurer's ability to meet its obligations to policyholders. AM Best assigns letter ratings ranging from A++ (Superior) to D (Poor), plus an F (In Liquidation) designation; the rating reflects the insurer's balance sheet strength, operating performance, and business profile. Ratings are assigned after a comprehensive review of the insurer's financial statements, reserve adequacy, investment portfolio quality, reinsurance program, management, and strategic position. Most sophisticated insurance buyers—commercial insureds, mortgage lenders requiring homeowners insurance, and contract sureties—require carrier ratings of at least A- or A from AM Best as a minimum standard. Lenders financing high-value commercial properties often require A or A+ rated carriers in their mortgage covenants. AM Best also issues Credit Ratings (ICR) reflecting the issuer's ability to meet debt obligations, and issues ratings for specific insurance groups as well as individual operating companies. Consumers can access AM Best's publicly disclosed ratings through their website; subscription-based products provide detailed analytical reports. AM Best's ratings are updated continuously and can be downgraded rapidly in response to significant adverse developments—such as a carrier's heavy loss exposure in a major catastrophe event.

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Tip

Glossary definitions are educational. Always check your own policy language — insurers can define common terms differently from one another. When in doubt, request a written explanation from your agent.

Related terms

Admitted CarrierAdmitted carriers have met state licensing, financial, and regulatory requirements and are subject to state oversight of their rates, forms, and claims practices—giving policyholders access to state guaranty fund protection.RBC (Risk-Based Capital)Risk-Based Capital (RBC) is the NAIC's statutory solvency framework that determines how much capital an insurer must hold, scaled to the types and levels of risk in its business—triggering regulatory intervention when capital falls too low.Policyholder SurplusPolicyholder surplus is the insurance industry's equivalent of stockholders' equity, representing the financial cushion that protects policyholders and enables the insurer to absorb unexpected losses beyond its reserves.ReinsuranceReinsurance allows primary insurers to limit their exposure to large or catastrophic losses by ceding a portion of premium and liability to reinsurers—enabling them to underwrite more risk than their capital alone could support.Financial ExaminationFinancial examinations are periodic solvency reviews conducted by state insurance departments to verify that insurers maintain adequate reserves, capital, and surplus to meet their obligations to policyholders.
Source: Cover Forge USA editorial team|Last verified: May 2026|Methodology
Definitions are educational and may be simplified. Always refer to your policy contract and consult a licensed agent for terms that affect coverage decisions.
CF

Cover Forge USA Editorial Team

Editorial Lead

This article was researched and written by the Cover Forge USA editorial team against federal sources (NAIC, CMS, FEMA, DOL, SSA, state DOIs) and standard policy forms. Bylines organize content by topic — they do not assert individual licensure. See our editorial-policy for details.

Reviewed June 2026

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