Financial strength ratings compared: AM Best, S&P, Moody's, Demotech

AM Best, S&P Global Ratings, Moody's and Demotech each publish an opinion on whether an insurer can pay its policyholders, but they use different letter scales, different methods and different cut-offs, so the same letter means different things. An "A" from Demotech is labeled Exceptional, an "A" from AM Best is labeled Excellent, and an "A" from S&P or Moody's sits in a different place on a different scale. None of them rates price, customer service or how your claim will be handled.

This article lines the four up without declaring a winner. It covers what each one rates, how the scales run, how the agencies are paid and how their methods differ, why Demotech is prominent among smaller and Florida-focused insurers and why regulators have criticized it, why lenders name minimum ratings, how to read an outlook, and why every rating is a dated snapshot. The facts come from each agency's published pages and from press reports, as they read in November 2026.

What every one of these ratings measures, and what none does

Each rating is an opinion about an insurer's financial strength: its ability to meet its obligations to policyholders. AM Best's Guide to Best's Financial Strength Ratings describes its rating as an independent opinion of an insurer's financial strength and ability to meet ongoing policy obligations, and says it does not address claims-payment policies or procedures, the insurer's ability to dispute or deny claims on grounds such as fraud, or the suitability of a policy for a buyer. Demotech's rating definitions describe a Financial Stability Rating as an opinion on an insurer's ability to insulate itself from the economic business cycle and the insurance underwriting cycle.

So a rating answers "will this company still be solvent and paying claims?" It does not answer:

• Price. A top-rated company can be the most or least expensive for you.
• Claims service. A strong balance sheet does not guarantee fast, fair claim handling. For service, see how to research a car insurance company before you buy.
• Coverage. Two highly rated insurers can sell very different policies.
• Which company you actually have. Ratings attach to a specific legal entity. The brand on your quote may be a group of several entities, and the declarations page names the one that insures you.

Because the agencies measure solvency, their ratings overlap with the statutory numbers explained in how to read an insurer's combined ratio and surplus: surplus, leverage, reserves and earnings feed into every one of them.

The four scales side by side

AM Best publishes its scale and category definitions in its guide, and Demotech publishes its scale on its definitions page. S&P and Moody's publish theirs on their own sites, which were not reachable when this article was written. The S&P and Moody's labels below are as reproduced by Securian Financial, an insurer rated by both, on its pages for S&P and Moody's (material dated September 2025). Check each agency's own page for the exact definitions.

Placing the scales in one table is orientation, not equivalence. Three differences matter in practice:

1. The letters are not interchangeable. AM Best's "A" is its Excellent tier and sits below A++ and A+. S&P's "A" is one of its Strong tiers, below AAA and the AA group. Moody's "A" categories are labeled Good. Demotech's "A" is Exceptional, below two "Unsurpassed" tiers. A single letter quoted without the agency's name tells you almost nothing.
2. Where "secure" ends varies. AM Best's own category definitions describe B and below as vulnerable to adverse changes, while B++ and B+ (Good) carry no such warning. Third-party summaries sometimes label those tiers differently. Munich Re's investor page, for example, calls B++ and B+ "Very good," while AM Best's guide says "Good." Use the agency's wording.
3. Demotech's scale is shorter and has a different logic. Its definitions tie each tier to a statistical expectation: for an A, at least 97 percent of insurers receiving that rating are expected to have positive surplus as regards policyholders 18 months after the rating is assigned, even through a severe downturn. The corresponding figures on its page are 100 percent for A″, at least 99 percent for A′, at least 95 percent for S and at least 90 percent for M. These are expectations about staying solvent, not about financial size or earnings strength.

How the methods and business models differ

What the agencies analyze. AM Best's guide says its credit rating opinion is a comprehensive analysis of balance sheet strength, operating performance, business profile and enterprise risk management. Demotech says its ratings rest on a series of quantitative ratios and certain qualitative factors, with a focus on balance sheet integrity, including the quality and quantity of reinsurance and the adequacy of loss reserves. S&P and Moody's follow their own published criteria, which are lengthy and which this article does not summarize.

Who pays. Insurers typically request their ratings and pay the agency. Demotech's website invites insurers to contact it about obtaining a Financial Stability Rating. That arrangement is common across the rating industry, and critics of every agency point to the conflict of interest. Agencies answer with their methodology, reputational risk and, in some cases, registration as nationally recognized statistical rating organizations; Demotech's page describes its ratings as NRSRO ratings. An insurer that finds one agency's rating unfavorable can leave it. In its 2023 coverage, Insurance Journal reported that Auto Club Insurance Company of Florida had left Demotech in 2019, citing cost, and that three other Florida insurers had sought ratings from other firms.

Coverage of the market. Not every insurer is rated by every agency. Large national groups tend to carry ratings from several, while many small regional and mutual companies carry only one or none. A missing rating is not a red flag in itself, but it shifts more of the checking to you and the state regulator. See AM Best financial strength ratings explained for what to do when AM Best has no rating.

Why Demotech is prominent in Florida and why it is debated

Demotech ratings are especially visible among smaller insurers in Florida and other states with many regional, closely held carriers. A rating from AM Best or S&P is often out of reach for a young or small company, so a Demotech rating became the credential many such carriers show to lenders and agents.

That prominence became a public dispute in 2022. According to Insurance Journal's August 2022 report, Demotech notified 17 Florida property insurers that their ratings would fall from A Exceptional to S Substantial or M Moderate. The state's insurance commissioner said Demotech had not followed its own published methodology, the state's chief financial officer wrote to federal housing officials asking them to reconsider reliance on Demotech, and an agents' association argued that Demotech held a near-monopoly on ratings of Florida domestic carriers. Demotech's president said the regulators' letters were inaccurate and had misread its plans. The regulators also said insurers reported that Demotech would not consider additional financial information or capital infusions.

A year later, Insurance Journal's follow-up reported that Demotech had posted new ratings for most Florida-admitted carriers based on first-quarter 2023 financials, that almost all ratings of the state's 50 largest insurers were unchanged and still among its highest, and that some in the industry questioned how carriers in a distressed market kept top ratings so soon after the warnings. Defenders said Demotech's warning reflected real market distress and that the domestic Florida market owed its existence to the firm after Hurricane Andrew. Critics, including a reinsurer quoted in the article, said some Demotech-rated Florida specialists did not meet its own financial underwriting standards.

For a reader, the lesson is not that Demotech is good or bad. It is that:

• A Demotech rating is a real opinion by a registered rating firm, and the dispute is about its consistency and its role in a state market with heavy storm and litigation losses.
• Which agency a lender accepts can decide whether an insurer can sell to certain customers (see below), so ratings carry commercial weight.
• A rating from any agency should be read alongside regulator data: the state's financial examinations, complaint data and the company's reported surplus.

Why lenders and contracts name minimum ratings

Lenders have an interest in whether the insurer behind a borrower's coverage will survive. Fannie Mae's Selling Guide topic B7-3-01, General Property Insurance Requirements for All Property Types (dated December 14, 2022), sets minimum ratings for homeowners-type property insurers on loans it buys: a Financial Strength Rating of B or better from A.M. Best, A or better from Demotech, BBB or better from Kroll Bond Rating Agency, or BBB or better from S&P Global. An insurer needs to meet only one agency's requirement. Moody's is not named on that page.

Three details deserve attention. The AM Best floor is B, which is a Fair rating that AM Best defines as vulnerable to adverse changes, well below the A tiers many consumers assume are the minimum. The Demotech floor is A (Exceptional), which is why a drop to S Substantial in 2022 mattered to Florida homeowners and agents. And the rule is for mortgage insurance on homes, not for car insurance.

Auto lenders and lessors typically require specific coverages, such as comprehensive and collision, and name themselves as lienholder on the policy. Whether your auto loan or lease also requires a minimum insurer rating is a matter for your contract. See loan and lease insurance requirements: what your lender can demand for how those requirements work, and what an insurer downgrade means for policyholders and lenders for what happens when a rating falls below a contract floor.

How to read a rating action and an outlook

A rating usually appears with more than a letter. The pieces to look for:

1. The agency and the exact entity. "Rated A" means nothing without the agency, and the rating applies to a named company or group.
2. The date. AM Best's guide to proper use asks rated companies to show a current date with a rating and to point to its website for the latest rating, because a rating can change. AM Best's guide also says a rating may be changed, suspended or withdrawn at any time at its discretion.
3. The outlook. An outlook of positive, stable or negative shows the possible direction of the rating over the short to medium term. The same Munich Re page, which summarizes the major agencies, notes that an outlook is not necessarily a precursor of a change.
4. A review or watch status. AM Best uses a "u" (under review) modifier, and the other agencies use "watch" or "review" language, after identifiable events such as a major catastrophe, merger or restructuring. It signals uncertainty about the outcome and a possible direction.
5. The direction since the last action. A downgrade from A+ to A is a different event from a downgrade from B+ to B. Compare the new rating with the contract or purchasing threshold that matters to you, not with the old letter.

AM Best also publishes a Financial Size Category, a size indicator that is not part of the rating.

A worked comparison

Say you receive three quotes in a state where regulators license many small insurers, and each quote cites a rating:

• Insurer 1: "Rated A by Demotech."
• Insurer 2: "AM Best A- (Excellent), negative outlook."
• Insurer 3: "Not rated."

Insurer 1's rating is Demotech's Exceptional tier. It tells you the firm expects a very high share of insurers at that level to stay solvent through a downturn. It does not say how large the company is or how it handles claims, and you should confirm it on Demotech's site. Insurer 2's rating is in AM Best's Excellent category, and the negative outlook says the direction may be down. That is worth asking about but not alarming on its own. Insurer 3 may be a small mutual or a new company. Ask the insurer why, check that it is licensed (see admitted insurer), and look at its financial examinations and complaint record with the state state department of insurance.

None of the three answers tells you which is cheaper or pays faster. Compare price and coverage on the quotes themselves with the compare auto insurers side by side.

Questions to ask when a rating is quoted

• Which agency issued it, and what is the exact name of the rated company?
• What is the effective date, and is there an outlook or a review status?
• Does the rating apply to the company that will issue my policy, or to a parent or affiliate?
• If the insurer is not rated, is it licensed in my state, and what do the regulator's records show?
• If I have a loan or lease, does my contract name a minimum rating or an approved agency?
• If the insurer fails, what does the state guaranty fund cover? See what happens if your car insurer goes insolvent.

Common questions

Is an A from one agency the same as an A from another?

No. Each agency has its own scale, definitions and method. An A from AM Best is its Excellent tier, an A from S&P is a Strong tier, and an A from Demotech is its Exceptional tier. Always read the agency's name and definition next to the letter.

Which agency is best?

This article does not rank them. AM Best specializes in insurance and rates a wide range of insurers. S&P and Moody's rate mostly larger groups. Demotech rates many smaller insurers. Choose the one that rates the company you are considering, and read it with the date and outlook.

Does a high rating mean my claim will be paid quickly?

No. The ratings address financial strength, and AM Best's guide says explicitly that its rating does not address claims-payment policies or procedures. Use complaint data and satisfaction surveys for service.

Should I avoid a Demotech-rated insurer?

A Demotech rating is a legitimate opinion, and many regional insurers rely on it. The better question is how the company looks across several measures: rating, surplus and leverage, complaints and the regulator's records. Rules for lenders differ, so confirm that a Demotech rating meets any requirement in your own contract.

Key takeaways

• AM Best, S&P, Moody's and Demotech all rate financial strength, but their scales, wording and methods differ, so a letter means nothing without the agency's name.
• None of the ratings measures price, claims service or coverage quality; AM Best's guide says its rating does not address claims-payment practices.
• Demotech's scale ties each tier to the share of rated insurers expected to keep positive surplus 18 months out. Its prominence among smaller and Florida insurers is also the source of regulator criticism, notably in 2022.
• Lenders name minimum ratings, for example Fannie Mae's B from AM Best or A from Demotech for property insurance on mortgaged homes, but auto loan and lease terms are set in your own contract.
• Every rating is a dated snapshot: read the date, the outlook and any review status, and re-check before a big decision.