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A.M. Best

Definition

A.M. Best is a U.S.-based rating agency headquartered in Oldwick, New Jersey, that focuses on the insurance industry. Both the U.S. Securities and Exchange Commission and the National Association of Insurance Commissioners have designated the company as a Nationally Recognized Statistical Rating Organization in the United States.

wikipediaSource: Wikipedia
Last Sourced: 2017-08-01
This Article has been Edited for Accessibility

A. M. Best

A.M. Best is a U.S.-based rating agency headquartered in Oldwick, New Jersey, that focuses on the insurance industry. Both the U.S. Securities and Exchange Commission and the National Association of Insurance Commissioners have designated the company as a Nationally Recognized Statistical Rating Organization (NRSRO) in the United States.

Unlike other NRSROs like Standard & Poor's, Moody's, Kroll Bond Rating Agency, and Fitch Ratings, whose ratings focus on the business sector, A.M. Best historically has focused exclusively on the insurance marketplace. 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.

In addition, A.M. Best also publishes a series of printed and online directories of insurance professionals and publications. The oldest and best known is Best's Directories of Recommended Insurance Attorneys & Adjusters. Insurance publications include BestWeek, a weekly newsletter, Best's Review, a monthly magazine, and an online wire service called BestWire.

History

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 in 1974. It also maintains offices in London, Hong Kong, Dubai, Mexico City, Singapore and a news bureau in Washington, D.C.

A.M. Best created and maintains A.M. Best's Financial Suite, databases of financial statement information from the annual and quarterly financial statements filed by insurers with the National Association of Insurance Commissioners. The Best's Aggregates & Averages series details both current and historical statistics on the U.S. and Canadian property/casualty and life/health industries.

Since first reporting on the insurance impact of the San Francisco earthquake in 1906, A.M. Best has covered news events that impact the insurance industry. The company publishes several popular insurance news publications including BestWeek, a weekly insurance industry newsletter with three regional editions (U.S./Canada, Europe and Asia/Pacific); Best's Review, a monthly magazine; and an online wire service called BestWire. Additionally, A.M. Best publishes an online daily news digest called BestDay — a video edition of which is available on the company’s home page.

While the company is best known in the United States, it is becoming increasingly well known in Europe and the Pacific Rim. The company's London offices consist of A.M. Best Europe—Rating Services and A.M. Best Europe—Information Services. A.M. Best Asia-Pacific is located in Hong Kong and Singapore.

Financial Strength and Issuer Credit Ratings

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 formulas are proprietary.

The ratings scale includes six "Secure" ratings:

The scale also includes ten ratings for companies deemed "Vulnerable":

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 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.

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.


Additional Resources

  1. American Economic Review [economics.mit.edu]
  2. Why I Am An Economist (sigh) [web.mit.edu]
  3. Trendline Alumni Newsletter Summer 2015 [economics.indiana.edu]
  4. Test Tutoring Table [economics.ucla.edu]
  5. Michael Best [stanford.edu]