What do rating agencies like A.M. Best assess in insurers?

Rating agencies like A.M. Best primarily assess the financial strength of insurers. This involves evaluating an insurer's ability to meet its ongoing insurance obligations and claims. Financial strength ratings provide insight into the insurer's solvency, liquidity, reserves, and overall financial health, which are crucial indicators for policyholders looking for reliable coverage.

Understanding the financial strength of an insurer is essential because it helps consumers and businesses make informed decisions when selecting insurance providers, ensuring that the company they choose will be able to pay claims when necessary. This assessment often considers factors like financial performance over time, the stability of management, and economic conditions that could affect the insurer's operations.

In contrast, other factors such as the number of employees, licensing status, or geographical reach, while relevant in some contexts, do not directly reflect an insurer's ability to fulfill its financial obligations.