Annuity insurer ratings improved overall in the first half of 2026, but annuity writers took most of the downgrades, according to a new AM Best report. Upgrades outnumbered downgrades by two to one among U.S. life/annuity and health insurers. The upgrades went mostly to life insurance companies.
- More upgrades than downgrades: AM Best upgraded twice as many U.S. life/annuity and health insurers as it downgraded in the first half of 2026.
- Annuity writers lagged: life companies took most of the upgrades, while most downgrades were annuity writers.
- Most ratings held steady: affirmations made up 82.3% of all rating actions.
- Watch reinsurance: AM Best flagged that some annuity insurers rely on offshore reinsurance to manage capital.
- For buyers: check your insurer’s current rating, especially before chasing an unusually high rate.
What AM Best Found
OLDWICK, N.J., Oct. 13, 2026. AM Best published the findings on October 1 in a special report titled “More Upgrades, Fewer Downgrades for L/H Insurers in First Half 2026.” AM Best is the credit rating agency most focused on insurance companies, and its ratings are the ones most annuity shoppers see.
- Life segment: 5 upgrades and 3 downgrades, two more upgrades and one fewer downgrade than in the first half of 2025.
- Why ratings rose: about one-third of upgrades came from better operating results, and another third from stronger enterprise risk management.
- Under review: the number of ratings placed under review was unchanged from a year earlier.
AM Best described life/annuity insurers as well capitalized, with rising surplus and favorable risk-based capital. It said companies have handled higher surrender activity through asset/liability matching and surrender charge protections.
Why Annuity Writers Took the Downgrades
The report did not name the downgraded companies or give a single cause. It did point to one recurring concern. “Some US L/A insurers continue to depend on reinsurance for capital management, particularly offshore reinsurance,” said Helen Andersen, an industry analyst at AM Best.
Offshore reinsurance means an annuity insurer passes part of its obligations to a reinsurer based outside the U.S., often in Bermuda or the Cayman Islands. It frees up capital and can support higher rates. It also adds a layer that is harder for state regulators and policyholders to see.
Annuity sales have also grown fast. LIMRA reported a record $123.9 billion in second-quarter 2026 annuity sales, and rapid growth puts pressure on capital.
What This Means for Annuity Buyers
Your guaranteed rate is only as strong as the company behind it. A rating change doesn’t affect your contract terms, but it tells you how the rating agency sees the insurer’s ability to pay over the long run.
- Check the rating before you buy: look up the insurer on AM Best’s website. We suggest A- or better for any multi-year contract.
- Be wary of outlier rates: some rate sites currently list top rates from carriers rated B+, well above what carriers rated A- or better pay. The extra yield is payment for extra risk.
- Know your backstop: if an insurer fails, your state guaranty association covers annuities up to a limit, often $250,000 per owner per insurer.
- Spread large amounts: splitting a big premium between two highly rated insurers keeps more of it inside guaranty limits.
Insurer failures are rare, but they do happen. PHL Variable Insurance Company, whose ratings declined for years, is now in court-supervised receivership in Connecticut. It is a reminder that ratings are worth checking.
Overall, annuity insurer ratings are holding up well in 2026, but the downgrades that did happen landed mostly on annuity writers.
Frequently Asked Questions
What AM Best rating should an annuity company have?
We suggest A- or better for any multi-year annuity. AM Best calls A- and A “excellent” and A+ and A++ “superior” financial strength.
Does a downgrade change my existing annuity?
No. A rating downgrade does not change your contract, your guaranteed rate or your surrender schedule. It reflects the rating agency’s view of the insurer’s long-term ability to pay, so it is a signal to monitor.
What happens to my annuity if the insurer fails?
A court-appointed receiver takes over the company, and policyholders get priority over most other creditors. Your state guaranty association also covers annuity benefits up to its limit, often $250,000 per owner per insurer.
Related Reading
- Are annuities safe? What the guarantees really mean
- U.S. life and annuity insurers ended 2025 with record capital strength
- Best fixed annuity companies of 2026
