AM Best

Overview

A.M. Best Company is the credit rating agency that rates nothing but insurers — “the only credit rating agency that specializes solely in the insurance industry,” where Moody’s, Fitch, and Standard & Poor’s rate debt across the public and private sectors in addition to insurance (Investopedia). Founded in New York City in 1899 by Alfred M. Best, privately held, and headquartered in Oldwick, New Jersey, it evaluates more than 16,000 insurers in over 100 countries and is one of only 10 credit rating agencies registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (Investopedia; SEC). Its core product, the Best’s Credit Rating, includes a Financial Strength Rating — the agency’s assessment of an insurer’s ability to meet its obligations to policyholders — built from qualitative and quantitative assessments of the balance sheet, operating performance, and business profile (Investopedia).

What an AM Best rating actually measures — and the line that matters

The rating scale is where most readers go wrong, because the important boundary is not between letter grades but between two words: “secure” and “vulnerable.” AM Best maintains six secure ratings, from the highest A++ down to B+, and ten vulnerable ratings, from B down to S (suspended) (Investopedia). B+ is therefore the lowest secure rating and B the highest vulnerable one — a downgrade from B+ to B is not one notch among many; it crosses the secure/vulnerable line. That arithmetic is directly load-bearing for profiles that cite AM Best actions: when the agency cut First Acceptance’s insurance subsidiaries’ financial-strength rating, the question to ask first is which side of that line the new rating sits on. Consumers check the ratings to judge an insurer’s stability before buying a policy; investors and finance professionals use them before buying insurers’ stocks or bonds (Investopedia).

The agency’s regulatory standing is narrower than most explainers suggest. As of December 31, 2025, A.M. Best Rating Services, Inc. is registered as an NRSRO in exactly three categories: insurance companies, corporate issuers, and issuers of asset-backed securities — not in financial institutions or government securities (SEC). And a rating describes the insurer, not the policy: it is the agency’s opinion on the operating company’s ability to meet policyholder obligations — relevant, for example, to the insurance subsidiaries of a holding company, not to the holding company itself.

The insurance-only rating agency: a short history

Alfred M. Best — born August 31, 1876, in Caldwell, New Jersey — came to the idea through disgust: after a stint assisting the underwriter of a fraudulent Lloyds outfit convinced him he was in “a den of thieves,” and editorial work at an insurance periodical showed him the information gap, he concluded there should be “some place where any one interested, whether insured, agent or broker, could obtain a reliable report upon the financial condition and operating methods of insurance companies” — an independent arbiter of insurer financial health (Insurance Hall of Fame). He launched the company in 1899 and incorporated it on December 14 of that year; the first edition of Best’s Insurance Reports followed in the spring of 1900, the first insurance-company credit ratings in 1905 at the behest of the New York Insurance Superintendent, and Best’s Key Rating Guide in 1907 (Insurance Hall of Fame). Best also advanced the use of the combined ratio in assessing underwriting profit — a metric still central to insurance analysis (Insurance Hall of Fame).

Demand compounded after the 1906 San Francisco earthquake, whose claims bankrupted 12 American and two European insurance companies and made trustworthy insurer ratings a commercial necessity (Investopedia). A 1999 profile could already call A.M. Best “the first company in the world to rate insurance companies on the basis of their financial stability” and note its ratings had become “the standard measure of insurers’ financial strength” — at the time covering more than 2,600 property/casualty and 1,700 life/health companies plus 1,100 insurers in 65 countries, with 89% of surveyed insurance professionals using its service (NJBIZ). That same year the company expanded beyond financial-strength ratings into rating insurers’ debt and preferred stock, while insisting its focus would stay on the insurance niche (NJBIZ). International offices followed from 1997 (London) through 2018 (Amsterdam), via Hong Kong, Dubai, Mexico City, and Singapore (Investopedia).

Criticism: the 2008 AIG episode

The caveat on every AM Best rating is September 2008. As the financial crisis hit American International Group — enormous losses at its derivatives-trading subsidiary, AIG Financial Products, threatening the whole company including its dozens of owned insurers — the rating agencies, AM Best included, “were sharply criticized for not recognizing sooner the risk that AIG’s aggressive trading operations created” (Investopedia). Best cut AIG’s financial-strength rating to A+ (from A++) and its issuer credit ratings to “aa” (from “aa+”) only as the company faced collapse; the federal government then took over with $182 billion of support, repaid in full by the end of February 2013 (Investopedia). The episode is the reason a rating is an opinion, not a guarantee — and why the secure/vulnerable line, not the letter grade alone, is the thing to watch.

Frequently asked questions

What does AM Best do? It is a credit rating agency specializing solely in the insurance industry. Its Best’s Credit Rating assesses an insurer’s financial strength — its ability to meet policyholder obligations — based on the balance sheet, operating performance, and business profile.

What is the difference between a secure and a vulnerable AM Best rating? Secure ratings run from A++ down to B+; vulnerable ratings run from B down to S (suspended). B+ is the lowest secure rating and B the highest vulnerable one, so a B+ to B downgrade crosses the secure/vulnerable boundary.

Is AM Best regulated? Its rating-services arm, A.M. Best Rating Services, Inc., is one of 10 agencies registered with the SEC as a Nationally Recognized Statistical Rating Organization, in the insurance-companies, corporate-issuers, and asset-backed-securities categories (as of December 31, 2025).

Who founded AM Best? Alfred M. Best, who launched the company in New York City in 1899 (incorporated December 14, 1899) after concluding the insurance industry needed an independent arbiter of insurer financial health. The first formal insurance-company credit ratings followed in 1905.

Why was AM Best criticized in 2008? Along with the other agencies, it was sharply criticized for not recognizing sooner the risk in AIG’s derivatives-trading operations; it cut AIG’s financial-strength rating from A++ to A+ only as the company faced collapse and a $182 billion federal bailout.

What this profile does not claim

This profile does not merge the differing coverage counts (16,000+ insurers evaluated per Investopedia vs. the 1999 NJBIZ counts) — each is attributed, not combined. It dates the first formal insurance-company credit ratings to 1905 per the Insurance Hall of Fame while flagging that Investopedia dates rating activity to 1899. It does not assert AM Best’s official FSR category definitions or its “not a recommendation” disclaimers, which were not verified from a fully-read source. It does not name current officers or claim knowledge of post-2023 methodology revisions. And it keeps the agency strictly separate from any particular rating action: a rating is the agency’s product and an opinion on the rated insurer — not on a policy, and not on a holding company above the rated subsidiaries.