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What Is AM Best & What Does It Have To Do With Certificate of Liability Insurance?

Securing a reliable insurance carrier is one of the most proactive steps you—and your vendors—can take to help projects run smoothly and satisfy legal requirements.

So, how can you ensure the provider you’re considering meets obligations and upholds contractual standards?

This is where AM Best comes in. For more than a century, this global credit rating agency has benchmarked insurers’ creditworthiness on a scale of A+ to D, to measure calculated risks and empower consumers to make informed decisions.

What Is AM Best?

AM Best ratings assess the creditworthiness of more than 16,000 insurance companies and assess a variety of factors to produce a rating between A+ and D.

The thorough reports analyze an insurance company’s ability to pay out claims, any outstanding debts, and other relevant obligations.

One of the oldest credit rating agencies in the world, AM Best measures insurance-related risks to help financial professionals and consumers make informed decisions.

How Are AM Best Ratings Determined?

Several factors influence an insurance organization’s AM Best rating, namely balance sheet strength, operating performance, enterprise risk management, business profile, and the details of a security, according to an AM Best guide to credit ratings.

Let’s take a look at each in more detail.

  • Balance Sheet: Balance sheets reflect financial dealings (assets, equity, liabilities, and so on) to indicate the insurer’s financial status and risk mitigation.
  • Operating Performance: This ratio measures a carrier’s business output in relation to its input to assess long-term feasibility.
  • Enterprise Risk Management (ERM): ERM refers to an insurer’s risk awareness and management.
  • Business Profile: This benchmarks an insurer against others in the industry, measuring factors such as market position, underwriting performance, pricing, and more.
  • Specific Nature of a Security: Finally, AM Best will analyze the tradable equity, debt, and hybrid securities—all of which affect market capital.

AM Best Rating Scale

Utilizing these factors and others, AM Best’s Financial Strength Rating (FSR) Scale benchmarks insurance companies’ ability to meet policy and contractual obligations.

Rating Categories

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How Do Ratings Relate to Certificate of Liability Insurance?

By leveraging these ratings, organizations, financial professionals, and consumers can make informed decisions about which carriers they might like to do business with.

For businesses that rely on third parties for projects, this analysis becomes especially important for not only securing a vetted provider but ensuring vendors have done so, as well.

As vendors are the backbone of any well-oiled project, securing reliable liability insurance providers that meet obligations and uphold policy standards is a must.

While many modern insurance agencies rank highly on the AM Best FSR scale (State Farm and Geico at A++, and Allstate at A+, for example), doing your due diligence to partner with a highly-rated provider will save time—and headaches—in the long run.

As with any part of your operations, the work isn’t finished when you select a provider. It’s a good idea to stay updated on AM Best scores over time, as they might change in response to ongoing monitoring and rating meetings.

Thorough COI Tracking & Vendor Management

Ensuring you and your vendors are covered through reputable carriers is key in helping your processes run smoothly.

Partnering with high-rated insurers that uphold policy standards and obligations helps mitigate risks and secure coverage when you need it most.

To help streamline all your vendor processes, today’s certificate of insurance (COI) tracking solutions enable you to track, hire, onboard, chat with, and manage vendors all from one centralized hub.

Cloud-based servers safely secure COIs and other documentation, and automated software enables you to correct compliance, insurance policy expirations, and other discrepancies with a few button clicks.

Gone are the days of hounding vendors, hunting for certificates of liability insurance, and misplacing crucial paperwork under mountains of other important paperwork.

Maximize your efficiency and save money by migrating your process digitally, returning all your critical documents into the palm of your hand.

BCS is a leading vendor management solution, with full- and self-service tracking options that streamline your COI tracking, hiring, vendor management, and so much more. To optimize your third party processes today, contact us today or schedule a demo.

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Learn from the pros about risk-mitigation, document tracking, and more, with expert articles from BCS.

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