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📊 '''AM Best''' is the world's leading [[Definition:Credit rating agency | credit rating agency]] focused exclusively on the insurance industry, providing financial strength ratings that gauge an [[Definition:Insurance carrier | insurer's]] ability to meet its ongoing [[Definition:Policy obligation | policy obligations]] and pay [[Definition:Insurance claim | claims]]. Founded in 1899, the company occupies a unique niche: while agencies like S&P Global and Moody's rate insurers alongside banks and corporations, AM Best has built its entire methodology around the economics of [[Definition:Underwriting | underwriting]], [[Definition:Reserve (insurance) | reserving]], and insurance-specific [[Definition:Risk management | risk management]]. Its Best's Financial Strength Rating (FSR) scale — ranging from "A++" (Superior) down to "F" (In Liquidation) — has become the de facto benchmark that [[Definition:Reinsurer | reinsurers]], [[Definition:Insurance broker | brokers]], [[Definition:Managing general agent (MGA) | MGAs]], and corporate [[Definition:Risk manager | risk managers]] consult when evaluating counterparty security.

⚙️ The rating process centers on AM Best's proprietary Building Block Approach, which evaluates an insurer across several dimensions: [[Definition:Balance sheet | balance sheet]] strength, operating performance, business profile, and [[Definition:Enterprise risk management (ERM) | enterprise risk management]]. Analysts examine quantitative indicators such as [[Definition:Combined ratio | combined ratios]], [[Definition:Loss reserve | loss reserve]] adequacy, [[Definition:Risk-based capital (RBC) | risk-based capital]] levels, and investment portfolio quality, then overlay qualitative judgment about management strategy and competitive positioning. A carrier seeking or maintaining a rating engages in an interactive process that includes detailed data submissions, management meetings, and periodic surveillance reviews. Any change — an upgrade, downgrade, or shift in outlook — is published and can ripple through the market almost immediately, affecting an insurer's ability to secure [[Definition:Reinsurance | reinsurance]], attract [[Definition:Delegated underwriting authority (DUA) | delegated authority]] partners, or write certain lines of [[Definition:Commercial insurance | commercial business]].

💡 For much of the insurance ecosystem, an AM Best rating functions as a gateway to doing business. Many [[Definition:Binding authority agreement | binding authority agreements]] and [[Definition:Reinsurance treaty | reinsurance treaties]] include minimum rating thresholds — typically "A−" or better — as a contractual requirement, meaning a downgrade can trigger termination clauses or force a carrier to post additional [[Definition:Collateral (insurance) | collateral]]. State [[Definition:Insurance regulator | regulators]] reference AM Best ratings when monitoring [[Definition:Solvency | solvency]], and large commercial buyers often mandate rated paper as a condition of placement. In the [[Definition:Insurtech | insurtech]] space, startups partnering with carriers frequently highlight the carrier's AM Best rating to build credibility with distribution partners. Because so many commercial relationships hinge on these assessments, maintaining a strong AM Best rating is not merely a reputational asset — it is an operational necessity that shapes capital strategy, growth plans, and [[Definition:Risk appetite | risk appetite]] across the industry.

'''Related concepts'''
{{Div col|colwidth=20em}}
* [[Definition:Credit rating agency]]
* [[Definition:Financial strength rating]]
* [[Definition:Risk-based capital (RBC)]]
* [[Definition:Solvency]]
* [[Definition:Enterprise risk management (ERM)]]
* [[Definition:Insurance carrier]]
{{Div col end}}

Definition:AM Best - Revision history

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