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⭐ '''A.M. Best rating''' is a financial-strength and creditworthiness assessment issued by A.M. Best Company, the [[Definition:Rating agency | rating agency]] most closely identified with the global insurance industry. Unlike general-purpose credit ratings, an A.M. Best rating is purpose-built to evaluate an [[Definition:Insurance carrier | insurer's]] ability to meet its ongoing [[Definition:Policy | policy]] and [[Definition:Claims | claims]] obligations—its so-called "ability to pay" promise. Ratings range from "A++" (Superior) down through various gradations to indicate the relative financial health of [[Definition:Property and casualty insurance | property and casualty]] companies, [[Definition:Life insurance | life insurers]], [[Definition:Reinsurer | reinsurers]], and [[Definition:Lloyd's syndicate | Lloyd's syndicates]].

📊 The rating process examines five key dimensions known as the Building Block Approach: balance-sheet strength, operating performance, business profile, enterprise [[Definition:Risk management | risk management]], and the operating environment. A.M. Best analysts review an insurer's [[Definition:Reserve | reserves]], [[Definition:Capital adequacy | capital adequacy]], [[Definition:Loss ratio (L/R) | loss ratio]] trends, [[Definition:Reinsurance | reinsurance]] programs, and management strategy before assigning or updating a rating. Carriers typically participate in an annual interactive review, providing detailed financial data and forward-looking projections. The resulting rating is published alongside an outlook indicator—positive, negative, or stable—that signals the expected direction of future changes.

💼 For market participants, an A.M. Best rating functions as a de facto passport. Many [[Definition:Managing general agent (MGA) | MGAs]] and [[Definition:Broker | brokers]] will only place business with carriers that hold an "A−" or better rating, and numerous [[Definition:Surplus lines | surplus lines]] regulations reference A.M. Best thresholds directly. [[Definition:Cedent | Cedents]] scrutinize a reinsurer's rating before entering [[Definition:Treaty reinsurance | treaty]] arrangements, and [[Definition:Policyholder | policyholders]] in commercial lines often require minimum ratings as part of contractual insurance provisions. A downgrade can trigger cancellation clauses in [[Definition:Binding authority agreement | binding authority agreements]] and restrict access to key distribution channels, making the rating a powerful lever that shapes competitive dynamics across the industry.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Rating agency]]
* [[Definition:Financial strength rating (FSR)]]
* [[Definition:Capital adequacy]]
* [[Definition:Insurance carrier]]
* [[Definition:Reinsurance]]
* [[Definition:Solvency]]
{{Div col end}}

Definition:A.M. Best rating - Revision history

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