What Is a Carrier Rating?
A carrier rating is an assessment of an insurance company's financial health and claims-paying ability, issued by independent rating agencies. When you purchase a fixed indexed annuity or MYGA, you are entering a long-term contract with the carrier, so its financial strength matters.
The Main Rating Agencies
Four agencies dominate insurance carrier ratings in the United States:
- AM Best — the oldest and most insurance-specific agency. Ratings run from A++ (Superior) down to D.
- Standard and Poor's (S&P) — uses AAA through D. Widely recognized across financial services.
- Moody's — uses Aaa through C.
- Fitch — uses AAA through D.
What Ratings Mean in Practice
A carrier rated A or above by AM Best is generally considered financially sound. Most independent advisors recommend sticking with carriers rated at least A- or equivalent. Carriers rated BBB/Baa are considered investment grade but carry more uncertainty over a 10- or 20-year contract horizon.
Carrier Ratings vs. State Guaranty Associations
State guaranty associations provide a secondary layer of protection if a carrier fails. Coverage limits vary by state but typically cover annuity values up to $250,000. Carrier ratings and guaranty association coverage are complementary, not interchangeable — relying solely on guaranty coverage without evaluating carrier strength is not prudent planning.
Checking Current Ratings
Ratings change over time. Look up the current AM Best rating directly on ambest.com before purchasing, and revisit periodically during a long contract term.