the letter A on a desk in a dark room
AM Best vs. Demotech Financial Stability Ratings - Home Insurance

Most homeowners want a home insurance carrier with a high financial stability rating. However, there are two leading insurance rating agencies out there: AM Best and Demotech. How do these differ, and which rating agency carriers more weight?

AM Best Ratings

AM Best is the gold standard in insurance financial stability ratings. AM Best was created by The Best Company, founded by Alfred M. Best in 1889. (aka the OG)

portrait of Alfred M Best

Alfred is a legend in the insurance industry: at 15 years old, he was a junior clerk with the Queen Insurance Company of America in New York. By age 23, he founded The Best Company. AM Best rates insurance companies on the following scale:

Rating AM Best Rating Definition
A+ Superior ability to meet their ongoing insurance obligations
A Excellent ability to meet their ongoing insurance obligations
B+ Good ability to meet their ongoing insurance obligations
B Fair ability to meet their ongoing insurance obligations
C+ Marginal ability to meet their ongoing insurance obligations
C Weak ability to meet their ongoing insurance obligations
D Poor ability to meet their ongoing insurance obligations

Demotech Ratings

Demotech is a younger insurance rating agency founded in 1985. This agency focuses on providing financial stability ratings for Managing General Agents and Regional Carriers that often use substantial reinsurance capital (money from Bermuda/European investors). These specialized insurance companies offload the liabilities of catastrophic payouts to third parties who have vast capital reserves. Demotech takes an in-depth look at these reinsurers and the contracts that bind them to rate the companies as follows:

Rating Demotech Rating Definition
A'' Unsurpassed, A Double Prime - Expect 100% Survival Rate, regardless of economic/insurance cycle downturn
A' Unsurpassed, A Prime - Expect 99% Survival Rate, regardless of economic/insurance cycle downturn
A Exceptional, A - Expect 97% Survival Rate, regardless of economic/insurance cycle downturn
S Substantial, S - Expect 95% Survival Rate, regardless of economic/insurance cycle downturn

Demotech reviews ~2,000 Property & Casualty Insurers each year and only provides financial stability ratings for 10% of those companies.

Who Should You Trust?

It depends on where you live. Most consumers should prefer an AM Best over Demotech Rating, but if you live in a coastal area or specific hard to insure regions, you may need to rely on Demotech. A company with neither a Demotech nor an AM Best rating should be a cause for concern to the average homeowner.

baby do not want GIF

I hope that helps!

At your service,
Young Alfred