AM Best Ratings For Insurance Companies

13
Sep

AM Best Ratings For Insurance Companies

AM Best ratings for insurance companies is provided by A.M. Best Company, Inc., headquartered in Oldwick, New Jersey. AM Best is a rating agency designated as a Nationally Recognized Statistical Rating Organization (NRSRO) by the United States Securities and Exchange Commission.

Founded in 1899 by Alfred M. Best in New York City, the privately held company moved to Morristown, New Jersey, in 1965, and subsequently to Oldwick, New Jersey, in 1974.

A.M. Best issues financial-strength ratings measuring insurance companies’ ability to pay claims. It also rates financial instruments issued by insurance companies, such as bonds, notes, and securitization products.

Ratings For Insurance Companies

There are currently five major companies publishing financial strength ratings on insurance companies. However, Unlike fellow NRSROs Standard & Poor’s, Moody’s and Fitch Ratings — all three of which issue ratings for a broad range of business sectors—A.M. Best historically has focused exclusively on the insurance marketplace.

It is in your best interest to check out any company you intend to do business with.

A.M. Best Company, (908) 439-2200

Standard & Poor’s, (212) 438-2000

Wiess Research, (800) 289-9222

Duff & Phelps, (312) 368-3198

Moody’s Investors Service, (800) 811-6980

Financial Strength and Issuer Credit Ratings

AM Best’s Financial Strength Ratings (FSR) represent the company’s assessment of an insurer’s ability to meet its obligations to policyholders. The rating process involves quantitative and qualitative reviews of a company’s balance sheet, operating performance and business profile, including comparisons to peers and industry standards and assessments of an insurer’s operating plans, philosophy and management. The ratings formulae are proprietary.

The ratings scale includes six "Secure" ratings:
A++, A+ (Superior)
A, A- (Excellent)
B++, B+ (Good)

The scale also includes ten ratings for companies deemed "Vulnerable":
B, B- (Fair)
C++, C+ (Marginal)
C, C- (Weak)
D (Poor)
E (Under Regulatory Supervision)
F (In Liquidation)
S (Rating Suspended)

There are many companies that A.M. Best follows but does not issue a Best’s Credit Rating on. These companies are designated as Not Rated (NR).

Long-Term AM Best Credit Ratings

Long-Term Credit Ratings assess the ability of an insurance company, holding company or other legal entity to meet its senior obligations. Ratings from "aa" to "ccc" sometimes are enhanced with a "+" (plus) or "-" (minus) to indicate whether the issuer is near the top or bottom of a category, and may be designated as Under Review ("u") when recent positive, negative or developing events dictate the rating may be subject to change in the near-term.

Insurance Company Ratings – Insurance Company Issuer Credit Ratings

Investment Grade
aaa (Exceptional)
aa (Very Strong)
a (Strong)
bbb (Adequate)

Non-Investment Grade
bb (Fair)
b (Marginal)
ccc, cc (Weak)
c (Poor)
d (In Default)

Short-Term Issuer Credit Ratings

Short-Term Issuer Credit Ratings assess the ability of a rated entity to meet senior financial commitments on obligations maturing in generally less than one year.

Investment Grade(AM ratings)
AMB-1+ (Strongest)
AMB-1 (Outstanding)
AMB-2 (Satisfactory)
AMB-3 (Adequate)

Non-Investment Grade
AMB-4 (Speculative)
d (In Default)

In short, AM Best ratings for insurance companies is one of the most sought after and you can refer to it before making a decision on which company to deal with.

Those Who Read This Also Read:

Posted by Stacy Homer last updated on Tuesday, September 13th, 2011 at 8:31 am