A rating that measures an insurer's ability to meet its financial obligations.
Financial strength ratings are issued by agencies like AM Best, S&P, and Moody's to assess whether an insurance carrier can pay claims. They consider the carrier's capital, reserves, investment portfolio, and management quality.
AM Best ratings of A- or higher are generally considered strong. Many businesses require carriers rated A (Excellent) or better. S&P and Moody's use different scales, but look for ratings of A- or above on those scales too. The rating reflects the carrier's ability to pay claims, so a strong rating provides confidence your claims will be honored.
Financial strength rating measures whether your insurance carrier can actually pay claims when you need them. A carrier with a weak rating may struggle during economic downturns or catastrophic loss years, potentially delaying or denying valid claims. Many lenders, investors, and contracts require coverage from carriers with minimum financial strength ratings, typically A- or better.
Financial strength ratings assess an insurer's ability to pay policyholder claims and are issued specifically for insurance companies by agencies like AM Best, S&P, and Moody's. Credit ratings measure an entity's ability to repay borrowed money and apply to any company issuing debt. Both evaluate financial health, but financial strength ratings focus specifically on claim-paying ability.
Definitions are educational and may be modified by your specific policy language, endorsements, and state rules. For regulatory guidance, refer to the California Department of Insurance or the NAIC.
Last updated: July 2026.