AM. The best rating is the rating published by A.M. The best company among all life, property and casualty insurers registered in the United States and US affiliates of foreign property insurers groups operating in the United States. Ratings are often used to determine the solvency, suitability, track record, and financial strength of insurance companies. Other rating agencies include Standard & Poor’s, Conning & Company, Fitch and Moody’s.
“A” rates are estimated rates that do not have loss experience statistics as a basis for developing them. The underwriter develops these rates on an individual risk basis, in accordance with what the underwriter considers to be a fair rate commensurate with the associated risk.
A bond is a tripartite contract in which an insurer agrees to pay damages caused by criminal acts (such as a pledge of fidelity) or the failure to perform a specific act (such as a performance obligation or surety). The principal (i.e., the party paying the premium on the bond) is also called the debtor (i.e., the party with an obligation to perform). In the event of a default, the guarantor (i.e., the insurer) pays for the losses of the third party (creditor). Then the debtor must reimburse the guarantor for the amount of the paid loss.
Insurance is a contractual relationship that arises when one party (the insurer), for a fee (premium), agrees to compensate the other party (the insured) for losses caused to a certain subject (risk) caused by certain unforeseen circumstances (hazards or dangers). The term ‘guarantee’, commonly used in England, is considered synonymous with ‘insurance’.