What is the difference between a Demotech rating and an AM Best rating?
They are different scales from different raters, and both measure solvency, not claims handling. Demotech Financial Stability Ratings run A Double Prime, A Prime, A, S, M, L. AM Best Financial Strength Ratings run A++ down to D. Most Florida-domiciled carriers carry Demotech; most national carriers carry AM Best.
| Demotech scale | A'' (Unsurpassed), A' (Unsurpassed), A (Exceptional), S, M, L, NR |
|---|---|
| AM Best scale | A++ and A+ (Superior) down to D (Poor), plus E, F, S and NR designations |
| What neither covers | Claims handling. AM Best says an FSR does not address claims-payment policies or procedures |
| Lender floor | Fannie Mae accepts a Demotech A or better, or an AM Best B or better |
| Florida record | 7 carriers holding a Demotech FSR were ordered into liquidation, Feb. 2022 to Feb. 2023 |
- • Both are financial-strength opinions about solvency. Neither is an opinion about claim payment. AM Best says so in its own rating guide.
- • The letters do not line up. Demotech’s A is the third step on a six-step ladder. AM Best’s A is the third notch on a thirteen-notch ladder.
- • Fannie Mae accepts a Demotech A or better, or an AM Best B or better. One acceptable rating from one agency is enough.
- • Seven carriers that held a Demotech FSR were ordered into liquidation between February 2022 and February 2023.
- • In five of those seven, the rating moved fewer than 31 days before the liquidation order. It was not an early-warning system.
The two raters
Both firms publish an opinion about one thing: whether an insurance company will still be able to pay claims after a bad year. They arrive at that opinion by different routes, on different scales, for different populations of companies. Everything else on this page follows from that.
Financial Stability Rating (FSR)
- Established 1985, Columbus, Ohio.
- Registered with the SEC as a nationally recognized statistical rating organization as of July 11, 2022.
- Says it was the first firm whose rating process was formally reviewed and accepted by Fannie Mae, Freddie Mac and HUD, which is what let it rate insurers of any size.
- An FSR is its opinion of an insurer's ability to insulate itself from the general economic cycle and the insurance underwriting cycle.
Financial Strength Rating (FSR)
- Established in the United States in 1899; says it pioneered financial strength ratings in 1905.
- Nearly 4,000 ratings across more than 100 countries.
- Worldwide headquarters in New Jersey, with regional centers in London, Amsterdam, Hong Kong, Singapore, Mexico City and Dubai.
- Defines its FSR as "an independent opinion of an insurer's financial strength" and its ability to meet ongoing policy and contract obligations.
Note the shared abbreviation. Demotech calls its product a Financial Stability Rating; AM Best calls its product a Financial Strength Rating. Both shorten to FSR, which is one reason the two get treated as the same measurement when they are not.
Both scales, side by side
Demotech publishes six rating levels plus a not-rated status. Each level is expressed as the share of insurers at that level expected to hold positive policyholder surplus eighteen months from the initial rating date.
AM Best publishes seven rating categories running A++ down to D. Every category from Superior through Weak carries a second symbol, the Rating Notch, marking a gradation inside that category. Below the rating scale sit four non-rating designations that describe a company's status rather than grade it.
- E Publicly placed by court order into conservation or rehabilitation, or where regulators have acted to delay or limit policyholder payments.
- F Publicly placed by court order into liquidation after a finding of insolvency.
- S A previously published rating suspended because a sudden, significant event cannot yet be evaluated.
- NR Not rated. Includes companies never rated and companies previously rated.
The letters do not translate. Demotech's A sits third from the top of a six-level ladder, with two levels above it. AM Best's A sits third from the top of a thirteen-notch ladder, with two notches above it and ten below. The clearest official confirmation that the scales sit differently is the mortgage rule in the next section: Fannie Mae treats a Demotech A and an AM Best B as equally acceptable.
Why your Florida carrier probably carries a Demotech rating
The mechanism is the mortgage, not the marketing. A lender that sells your loan into the secondary market has to know your insurer meets a financial-strength floor, so Fannie Mae's Selling Guide sets one. Its property insurer rating table accepts any one of four raters, and an insurer only has to clear the bar at one of them even if several rate it.
Florida's residential market runs on small, young, state-focused companies, many of them formed to write the business national carriers stopped writing. Those companies still need a rating on day one or their policies do not satisfy a mortgage, and Demotech built its business on rating that population. Demotech says it was the first firm whose rating process Fannie Mae, Freddie Mac and HUD formally reviewed and accepted, which is what opened the door to insurers of any size. AM Best's Florida footprint has historically been thin by comparison: in August 2022, at the peak of the crisis, an AM Best executive told Insurance Journal the firm rated thirteen Florida-domiciled insurers, with KBRA rating seven.
Our own carrier directory shows the same split. Of 52 Florida and South Carolina property carriers on file, 23 dossiers list a published financial-strength rating: 16 carry a Demotech FSR, 5 carry an AM Best FSR, two of the Demotech-rated carriers also carry a KBRA rating, and the remaining two entries are a government entity and an insolvent estate. Citizens, as a state-created insurer, is not rated at all.
What the rating did, and did not, predict
Between February 2022 and February 2023, seven property insurers that held a Demotech Financial Stability Rating were ordered into liquidation. In every case the rating moved first. In five of the seven it moved fewer than 31 days before the court order.
Every day count above runs from the withdrawal to the court order. On that measure the median gap was 24 days and the shortest was seven. Only United Property & Casualty gave anything resembling a season of notice, and that gap ran straight through Hurricane Ian. All seven ended with the rating withdrawn rather than lowered to a weaker grade, which matters: a company that goes from A to NR has not been marked down, it has stopped being measured. Two were downgraded before they were withdrawn, FedNat from A to S and UPC from A to M, so their first warning came earlier than the count shows.
Demotech's own withdrawal notices name the triggers. For Lighthouse Property Insurance Corporation, a Louisiana-domiciled company with a Florida book, Demotech pointed to a 2021 operating loss reflecting Hurricane Ida loss development that left capitalization below what an A required. For Southern Fidelity, it pointed to reinsurance for the 2022 hurricane season that was not complete as of June 2, 2022. Reserve adequacy and a completed reinsurance tower: those were the two triggers named, and neither is visible to a policyholder reading a quote.
None of this erased anyone's claim. In Florida a liquidation order makes the Department of Financial Services the Receiver, cancels policies on a stated date, and moves covered claims to the Florida Insurance Guaranty Association under statutory caps and filing deadlines. The UPC dossier and the FedNat dossier carry the specific numbers, contacts and bar dates for those two estates.
What neither rating measures: how the carrier treats your claim
This is not an inference. AM Best states in its own published rating guide that a Financial Strength Rating is not assigned to a specific policy or contract and does not address any other risk, expressly including an insurer's claims-payment policies or procedures, and its ability to dispute or deny a claim on grounds of misrepresentation or fraud. It also says an FSR is not a recommendation to buy, hold or terminate a policy. Demotech frames its own product as an opinion about surviving the economic and underwriting cycles, keyed to positive policyholder surplus eighteen months out.
Read plainly, both raters are answering the same narrow question: will the money be there. Neither is answering the question a denied policyholder is actually asking: will this company pay me. A carrier can sit at the top of either scale and still call storm-creased shingles wear and tear, reclassify a sudden leak as long-term seepage, or scope a roof below the deductible.
For claims behavior the public signal is complaint data, not a rating letter. The NAIC complaint index measures complaints against a carrier's size, with 1.00 as the market average, and our note on reading the NAIC complaint index explains what it can and cannot tell you. Read the two together: the rating for whether the company survives, the index for how it behaves while it does.
How to read a rating before you buy the policy
Six checks. They take about ten minutes and they are the difference between a letter and an actual data point.
Read the rater’s name before you read the letter.
A Demotech A is the third step down a six-step ladder. An AM Best A is the third notch down a thirteen-notch ladder. The same character means a different position on a different scale.
Check the date on the rating, not just the grade.
Florida FSRs are reviewed against the reinsurance year. A grade with no affirmation date attached is a screenshot, not a current opinion. Confirm it on the rating agency’s own site.
Watch for a withdrawal, not only a downgrade.
All seven failures in the table above ended with the rating withdrawn rather than lowered. A company that goes from A to NR has not been graded worse, it has stopped being graded.
Match the rating to the legal entity on your declarations page.
State Farm Florida is a separate company from the national State Farm entity and carries its own AM Best rating. The brand on the ad is not always the company that pays.
Ask what the rating is keyed to.
Demotech’s FSR levels are expressed as the share of rated insurers expected to hold positive policyholder surplus 18 months out. That is a solvency horizon, not a promise about your claim.
Read the complaint data next to the rating.
Solvency and service are different questions with different sources. The NAIC complaint index measures complaints against a carrier’s size, and it is the closest public read on claims behavior.
Rating questions, answered
Is a Demotech A rating as good as an AM Best A rating? +
They are not equivalent labels. Demotech assigns A Double Prime, A Prime, A, S, M and L, so an A is the third level on a six-level scale. AM Best runs A++ down to D across thirteen notches, so an A is the third notch. Fannie Mae treats a Demotech A and an AM Best B as equally acceptable for a mortgaged property, which is the clearest official signal that the two scales sit differently.
Why does my Florida insurer have a Demotech rating instead of AM Best? +
Florida-domestic carriers are mostly smaller, newer, state-focused companies, and Demotech built its business on rating exactly that population. A carrier still needs an acceptable rating from someone, because Fannie Mae, Freddie Mac and mortgage lenders require it before a policy will satisfy a loan. Demotech says it was the first firm whose rating process was formally reviewed and accepted by Fannie Mae, Freddie Mac and HUD.
Does a good financial rating mean my claim will be paid? +
No. AM Best states in its own rating guide that a Financial Strength Rating is not assigned to a specific policy and does not address an insurer’s claims-payment policies or procedures, or its ability to dispute or deny a claim on misrepresentation or fraud grounds. A solvent, highly rated carrier can still deny or underpay a valid claim. The rating is about the balance sheet.
What happens to my claim if my insurer loses its rating or is liquidated? +
A withdrawn rating changes nothing about your coverage by itself, though your lender may require you to replace the policy. A liquidation order is different: in Florida the Department of Financial Services becomes Receiver, policies are canceled on a stated date, and covered claims move to the Florida Insurance Guaranty Association subject to statutory caps and filing deadlines. Deadlines after an insolvency are short, so date every document.
- Demotech Financial Stability Rating definitions (A Double Prime through NR) · demotech.com ↗
- Demotech, what an FSR is and who accepts it · demotech.com ↗ · founding, NRSRO registration, Fannie Mae / Freddie Mac / HUD acceptance · demotech.com/about ↗
- Guide to Best's Financial Strength Ratings (full FSR scale, non-rating designations, and the disclaimer that an FSR does not address claims-payment policies or procedures) · ambest.com (PDF) ↗
- Fannie Mae Selling Guide B7-3-01, property insurer rating requirements · selling-guide.fanniemae.com ↗
- Demotech company records, FSR withdrawal dates · St. Johns ↗ · Avatar ↗ · Southern Fidelity ↗ · Weston ↗ · FedNat ↗ · UPC ↗
- Demotech withdrawal notices with stated reasons · Lighthouse ↗ · Southern Fidelity ↗
- Florida DFS Receiver, companies in liquidation and order dates · myfloridacfo.com ↗ · UPC estate ↗ · Avatar estate ↗
- Florida Insurance Guaranty Association, liquidation dates and claim bar dates · figafacts.com ↗
- AM Best and KBRA Florida-domiciled rating counts, August 2022 · Insurance Journal ↗
- Florida OIR active company search · companysearch.floir.gov ↗
Rating scales, rating actions and lender requirements change. Every rating and date above is a matter of public record as of August 2026; verify a current rating with the rating agency and your carrier before you rely on it. Not legal advice; consult an attorney about your specific claim.
Your carrier's rating is not the argument.
A denial turns on your policy language and the facts of the loss, whoever rates the company. Send the letter and the photos and get a straight read on what the carrier actually has.
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