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Best's Financial Strength Rating

Effective April 22, 2015

A Best's Financial Strength Rating (FSR) is an independent opinion of an insurer's financial strength and ability to meet its ongoing insurance policy and contract obligations. It is based on a comprehensive quantitative and qualitative evaluation of a company's balance sheet strength, operating performance and business profile. For more detailed information, read our Guide to Financial Strength Ratings.

Our rating process incorporates specific methodologies designed to address the Property/Casualty (Non-Life), Life/Annuity, and Health/HMO industry segments worldwide. View the complete Best's Credit Rating Methodology (BCRM).
A Best's FSR opinion addresses the relative ability of an insurer to meet its ongoing insurance obligations. It is not a warranty of a company's financial strength and ability to meet its obligations to policyholders. View our Important Notice for complete details.

A.M. Best's rating system has a proven track record in indicating insurance companies that may, over time, encounter financial difficulties (see Best's Impairment Studies: Life/Health, Property/Casualty). As such, a Best's FSR is recognized worldwide as the benchmark for assessing and comparing insurers' financial strength. Such a benchmark is increasingly important to an international market that looks for a strong indication of stability in the face of widespread deregulation, mergers, acquisitions and other dynamic factors.

Why a Best's Financial Strength Rating Is Important

For insurance companies, a Best's FSR is a strategic tool that can enhance consumers' confidence in the organization's stability, as well as its attractiveness to investors. A rating also enhances an insurer's credibility with reinsurers - a valuable resource, particularly for insurers entering new markets.

Insurance professionals depend on a Best's FSR to assess the creditworthiness of an insurer's operations, to evaluate prospective reinsurance accounts, to compare company performance and financial condition, and more. A rating can influence an agent's selection of plans to market.

A rating also is an important factor in the consumer's decision-making process to purchase insurance. Today's insurance consumers are well aware of how regional, political and economic instabilities can affect a marginal company. A Best's FSR can provide consumers with the information necessary for an educated buying decision.

A.M. Best Company is committed to maintaining Best's FSRs as the definitive source for information on the financial condition and operating performance of insurance companies worldwide.

Understanding Best's Financial Strength Ratings

A Best's FSR can be assigned to an insurance company on an interactive or non-interactive basis. In both cases, the rating scale and descriptors are:

Secure Vulnerable
A++, A+ (Superior) B, B- (Fair)
A, A- (Excellent) C++, C+ (Marginal)
B++, B+ (Good) C, C- (Weak)
D (Poor)
E (Under Regulatory Supervision)
F (In Liquidation)
S (Suspended)

Rating Modifiers may be assigned to Financial Strength Ratings.

Modifier Descriptor Definition
u Under Review Indicates the rating may change in the near term, typically within six months. Generally is event driven, with positive, negative or developing implications.
pd Public Data Indicates rating assigned to insurer that chose not to participate in A.M. Best's interactive rating process (discontinued in 2010).
s Syndicate Indicates rating assigned to a Lloyd's syndicate.

Ratings from A to C also may be enhanced with a "++" (double plus), "+" (plus) or "-" (minus) to indicate whether credit quality is near the top or bottom of a category.

An Outlook is assigned to an interactive FSR to indicate its potential direction over an intermediate term, generally defined as 12 to 36 months. An Outlook can be:

Outlook Definition
Positive Indicates possible rating upgrade due to favorable financial/market trends relative to the current rating level.
Negative Indicates possible rating downgrade due to unfavorable financial/market trends relative to the current rating level.
Stable Indicates low likelihood of a rating change due to stable financial/market trends.

To enhance the usefulness of ratings, A.M. Best assigns each rated (A++ through D) insurance company a Financial Size Category (FSC). The FSC is based on adjusted policyholders' surplus (PHS) in U.S. dollars and may be impacted by foreign currency fluctuations. The FSC is designed to provide a convenient indicator of the size of a company in terms of its statutory surplus and related accounts.

Many insurance buyers only want to consider buying insurance coverage from companies that they believe have sufficient financial capacity to provide the necessary policy limits to insure their risks. Although companies utilize reinsurance to reduce their net retention on the policy limits they underwrite, many buyers still feel more comfortable buying from companies perceived to have greater financial capacity.

Financial Size Category
Class Adj. PHS ($ Millions) Class Adj. PHS ($ Millions)
I Less than 1 IX 250 to 500
II 1 to 2 X 500 to 750
III 2 to 5 XI 750 to 1,000
IV 5 to 10 XII 1,000 to 1,250
V 10 to 25 XIII 1,250 to 1,500
VI 25 to 50 XIV 1,500 to 2,000
VII 50 to 100 XV 2,000 or greater
VIII 100 to 250

Not Rated Designation

The Not Rated (NR) designation is assigned to companies that are not rated by A.M. Best.

Usage of Best's Ratings

Best's Credit Ratings are proprietary and may not be reproduced without permission from A.M. Best. A company assigned a Best's Credit Rating should review the Guide to Proper Use, which outlines the acceptable parameters of the use of these ratings.

All queries regarding the use of proprietary information or to obtain a licensing agreement or a letter of consent should be directed to:
A.M. Best Company
Office of Intellectual Property
Ambest Road
Oldwick, New Jersey 08858

Phone: (908) 439-2200, ext. 5644

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