An AM Best negative outlook is not a downgrade. How outlooks work, what A- means, and where surety rating requirements like O. Reg. 461/24 apply.
Education only / verify at source / not legal advice. This page explains how a financial strength rating and a rating outlook differ, and where surety rating requirements actually apply. It is not legal, financial or rating advice, and it is not a recommendation about any insurer. Global Guarantors publishes industry education. We aren't a surety, broker, rating agency or law firm, and we don't publish premiums. Check the current rating at the rating agency and read your obligee's own rules before relying on anything here.
Start here: Glossary · Public owner's guide to accepting bonds
On October 15, 2026, AM Best announced that it had "revised the outlooks to negative from stable and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of "a-" (Excellent)" of Western Surety Company of Regina, Saskatchewan. The release went out at 1:20 PM Eastern, 10:20 AM Pacific.
Headlines about rating actions are easy to misread. A change of outlook can sound like a downgrade, and for anyone holding or relying on a surety bond, the word "negative" next to a surety's name is unsettling. But the two things AM Best did that day point in different directions. The rating itself, the opinion of the insurer's ability to meet its obligations today, was affirmed at A- (Excellent). What changed was the outlook, the agency's view of which way that opinion might move over the next few years if current trends continue.
That difference matters, and so does a second question that tends to get lost: who actually uses surety ratings? Some obligees set a rating floor in their acceptability rules. Many of the largest bond buyers in North America don't use credit ratings at all; they use lists of licensed or certified sureties. Whether a rating outlook has any practical effect on a bond depends on which kind of rule applies.
This guide explains what an outlook is, where A- sits on AM Best's scale, what AM Best said in this case, how one Ontario regulation uses ratings, how US and Canadian federal systems differ, and what to check if a rating action affects a surety you rely on. For background on the parties to a bond and why obligees ask for one at all, start with our Surety 101 hub.
Two companies, one name. Two unrelated insurers are called Western Surety Company.
- Western Surety Company, Regina, Saskatchewan. A Canadian property and casualty insurer on the Office of the Superintendent of Financial Institutions (OSFI) list of regulated entities, authorized for the fidelity and surety classes. The company says it is "licensed to write surety bonds in all Canadian Provinces and Territories" and "does not conduct business in the USA and is not affiliated in any way with any US firms." This is the company in AM Best's October 15, 2026 release.
- Western Surety Company, Sioux Falls, South Dakota. A separate US company. It is not part of this rating action, and nothing on this page is about it.
The lesson: always match the surety's exact legal name and home office address on the bond against the rating report or regulator listing you are reading. Our profile of the Canadian Western Surety Company carries the same caution.
AM Best publishes a Best's Credit Rating (BCR) on an insurer, and alongside it an outlook. The two answer different questions. The rating is an opinion about the insurer as it stands. The outlook is a signal about where that opinion might go.
AM Best's Guide to Best's Credit Ratings describes the outlook this way: it "is assigned in tandem with a BCR ... by providing an indication of the potential future direction of the opinion over an intermediate period, generally defined as 36 months." The same guide adds an important qualification: "Positive and Negative Outlooks do not necessarily lead to a change in the opinion. Similarly, a Stable Outlook does not preclude an upgrade or downgrade."
So an outlook is a forward-looking flag, not an action. It says the agency sees trends that, if they continue, could move the rating. It does not say the rating will move, and it does not say when.
| Outlook | What AM Best says it indicates |
|---|---|
| Positive | "Favorable financial and market trends, relative to its current BCR"; "If these trends continue," there is "a good possibility" of an upgrade |
| Stable | "Stable financial and market trends," and "a low likelihood" that the rating will change over an intermediate period |
| Negative | "Unfavorable financial and market trends, relative to its current BCR"; "If these trends continue," there is "a good possibility" of a downgrade |
The conditional phrase in the negative definition, "if these trends continue," does most of the work. A negative outlook describes a direction of travel the agency has observed. Whether the rating actually changes depends on what happens next: results can improve, the outlook can return to stable, or the rating can be lowered. AM Best's definitions do not assign a probability to any of these.
AM Best is also clear about the limits of its ratings generally. Its guide says a BCR "is not an indicator or predictor of defined impairment or default probability," and that it "may be changed, suspended or withdrawn at any time." In plain terms, a rating is an informed opinion, refreshed over time. It isn't a guarantee that an insurer will pay, and a weaker rating isn't a forecast that it won't.
For a bond obligee, that suggests a simple discipline. Treat the rating as one input, read it with the date it was issued, and check it again when it matters, such as when a bond is accepted, renewed or extended.
AM Best's Financial Strength Rating (FSR) scale groups letter grades into categories. The top of the scale looks like this:
| Category | FSR grades |
|---|---|
| Superior | A++, A+ |
| Excellent | A, A- |
| Good | B++, B+ |
| Fair | B, B- |
AM Best's Guide to Best's Financial Strength Ratings says the Excellent category is "Assigned to insurance companies that have, in our opinion, an excellent ability to meet their ongoing insurance obligations." A- is the lower of the two notches in that category.
The Long-Term Issuer Credit Rating uses lower-case letters ("a-" in this case) and is a separate scale. Both were affirmed on October 15.
Some rating rules, such as Ontario's O. Reg. 461/24 for AM Best, set the floor at A-. That regulation, discussed below, sets AM Best's floor at "A-" or higher.
That means an A- rated surety sits right at the line in rules that use an A- floor. It meets the floor today. A negative outlook on an A- rated insurer is therefore something a rating-based obligee may want to note and monitor. It does not mean the surety has fallen below any floor, and nothing in AM Best's release says it will. An affirmed A- rating is still at or above an A- floor.
For obligees that use a list rather than a rating, which is common, the notch has no direct effect at all. The section on lists and licensing explains why.
AM Best's October 15, 2026 release sets out both the reasons for the affirmed rating and the reasons for the negative outlook. It is quoted here rather than paraphrased, because paraphrase tends to make rating language sound either better or worse than it is.
According to the release, the ratings "reflect WSC's balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management."
| Building block | AM Best's assessment |
|---|---|
| Balance sheet strength | Very strong |
| Operating performance | Adequate |
| Business profile | Limited |
| Enterprise risk management | Appropriate |
The release says the revision "reflects continued volatility in WSC's operating performance, with the company generating net income in only three of the past five years and an underwriting gain in just two years." It continues:
AM Best also places the company in context: "The broader surety industry also has experienced elevated claims activity in recent years, but WSC's continued underwriting volatility and weaker performance relative to peers remain key concerns."
The release closes with the conditions under which the agency might act: "Negative rating action may occur if WSC's underwriting performance fails to improve, operating metrics continue to underperform peers, or results fall short of the adequate operating assessment."
That sentence is conditional. It lists what AM Best will watch, not what it expects. It is the agency's own framing, and readers should not turn it into a prediction.
As of the release, a bond issued by this company is backed by an insurer that AM Best rates A- (Excellent), with a very strong balance sheet assessment. The negative outlook is a watch signal about operating results. Anyone who relies on the rating should note the outlook, keep an eye on future AM Best releases, and check what their own acceptability rule requires. None of this is a reason to treat existing bonds differently today, and nothing in the release says any bond is affected.
Most people first meet a surety rating requirement in a specific rule. Ontario provides a clear, recent example.
O. Reg. 461/24, Surety Bonds – Section 70.3.1 of the Act, is a regulation made under Ontario's Planning Act, R.S.O. 1990, c. P.13. Section 3 says it "comes into force on the day it is filed," and it was filed on November 20, 2024.
It is a narrow rule. It applies to land-use planning approvals, not to construction contracts.
Section 2(1) says: "Owners of land and applicants for approvals in respect of land use planning matters may stipulate that a surety bond described in subsection (2) is to be used to secure an obligation imposed by the municipality that is required to be secured as a condition to an approval in connection with land use planning."
Three points follow from that wording:
Under s. 2(2), paragraph 1, the bond must be "of an insurer that is licensed under the Insurance Act to write surety insurance" and rated at or above one of five floors:
| Rating agency (as named in the regulation) | Minimum rating |
|---|---|
| Dominion Bond Rating Service | "A" or higher |
| Fitch Ratings | "A-" or higher |
| Moody's Investors Service Inc. | "A3" or higher |
| Standard and Poor's | "A-" or higher |
| A.M. Best Company, Inc. | "A-" or higher |
The rating floors are alternatives: a rating at or above the floor from any one agency satisfies the rating part of the test. The Insurance Act licence to write surety insurance is required in every case, on top of the rating.
Paragraph 2 of s. 2(2) also requires specific bond terms. These are what make such a bond behave, in substance, much like a pay-on-demand instrument, although the regulation itself does not use that phrase.
| Term | What the bond must provide |
|---|---|
| Default | The municipality "may, in its sole discretion, determine that the principal has defaulted" |
| Payment despite objection | Payment "will be made, notwithstanding any objection by the principal, and the insurer will not assert any defence or grounds of any nature or description for not making the payment" |
| Time to pay | Payment within 15 business days after notice ("business day" is defined in s. 1) |
| Term | What the bond must provide |
|---|---|
| Ending the bond | The insurer must give 90 days' notice to terminate, and the principal must deliver replacement security at least 30 days before termination |
| Reductions | The bond must set out how its amount can be reduced |
The regulation's test is a rating test: licence plus a minimum rating. A negative outlook is not a rating, and the regulation's text sets its floors by rating grade. Section 2(2) sets a minimum rating and does not mention outlook. The regulation's text, as summarized here, does not say what happens to a bond already in place if an insurer's rating later changes. That question belongs to the municipality and the bond's own terms, and this guide doesn't try to answer it.
Rating floors like Ontario's are one way to decide whether a surety is acceptable. They are not the only way, and for the two largest public bond buyers on the continent they are not the way at all. Our guide to why obligees require bonds covers the wider reasons obligees set acceptability rules in the first place.
| System | How a surety qualifies | Rating floor? |
|---|---|---|
| US federal contracts (FAR 28.202) | Listed in Treasury Department Circular 570, within its stated underwriting limit | No |
| Canada federal contracts | Former policy: licensed by a federal, provincial or territorial regulator. Current Directive: no surety rating test | No |
| Ontario planning approvals (O. Reg. 461/24) | Insurance Act surety licence plus one of five rating floors | Yes |
The Federal Acquisition Regulation, at 48 CFR 28.202(a)(1), says corporate sureties offered on federal contracts "must appear on the list contained in the Department of the Treasury's Listing of Approved Sureties (Treasury Department Circular 570)." Under 28.202(a)(2), the penal amount of a bond "should not exceed the surety's underwriting limit stated in the Treasury Department Circular 570" unless the excess is coinsured or reinsured.
That is a certification-and-limit system. Federal acceptability turns on Treasury listing and the underwriting limit Treasury assigns, not on a credit rating from any agency. The Bureau of the Fiscal Service says Circular 570 was "updated on August 1, 2026." Our Miller Act and little Miller Act guide explains how federal payment and performance bonds work in more detail.
Canada's former federal contracting policy took a similar list-based approach. Treasury Board's Contracting Policy included an Appendix L, "Acceptable Bonding Companies." That policy has been rescinded; the Contracting Policy page now reads "Rescinded," and the Directive on the Management of Procurement replaced it.
The historical Appendix L wording made the test a licensing test: "Only insurance companies that have been licensed by a Canadian federal, provincial or territorial regulator to provide financial security ... may provide financial security for federal Crown procurement contracts." The list itself was described by Treasury Board as an "administrative compilation," and readers were told to "verify the status of companies with the official lists of the relevant regulators." Appendix L contained no credit-rating test for bonding companies.
In short, Canada's former federal contracting policy relied on regulator licensing, not credit ratings. That policy was rescinded, and the current Directive does not set a surety rating test. Anyone bidding on federal work should check the solicitation's own security terms.
Whether an outlook, or even a rating, matters for a particular bond depends entirely on the obligee's own acceptability rule. Under a list-based system, the question is whether the surety is on the list or properly licensed, and within any stated limit. Under a rating-based rule, the question is whether the surety's current rating meets the floor. An outlook doesn't change the answer to either question on its own.
Putting the pieces together:
| A negative outlook does mean | It doesn't mean |
|---|---|
| The rating agency sees trends it considers unfavorable relative to the current rating | The rating was lowered |
| A rating change is possible over roughly 36 months if those trends continue | A downgrade is certain; AM Best says outlooks "do not necessarily lead to a change" |
| It is worth noting if your obligee's rule uses a rating floor | Bonds stop being accepted |
| A negative outlook does mean | It doesn't mean |
|---|---|
| The agency has said what it will watch, such as underwriting results and peer comparisons | The agency has predicted a particular result |
| It is a good prompt to re-check the rating at the next acceptance, renewal or extension | Anything changes for obligees that use a list, such as Circular 570 |
The words "affirmed" and "revised the outlook" belong together in any accurate summary of the October 15 action. Dropping the first one is how an outlook change gets misreported as a downgrade.
This checklist is general education, not legal or placement advice. Use it as a set of questions to bring to your obligee, your counsel or your surety professional.
The short version: check your obligee's rules and ask your surety professional.
Was Western Surety Company (Regina) downgraded? No. On October 15, 2026, AM Best affirmed its Financial Strength Rating of A- (Excellent) and its Long-Term Issuer Credit Rating of "a-" (Excellent). It revised the outlooks to negative from stable.
What is the difference between a rating and an outlook? A rating is the agency's current opinion of an insurer's financial strength. An outlook indicates the "potential future direction" of that opinion over an intermediate period, which AM Best generally defines as 36 months.
Does a negative outlook mean a downgrade is coming? Not necessarily. AM Best says "Positive and Negative Outlooks do not necessarily lead to a change in the opinion." A negative outlook means there is "a good possibility" of a downgrade "if these trends continue."
What does A- mean on AM Best's scale? A- is the lower of the two grades in AM Best's "Excellent" category, which it assigns to insurers with, in its opinion, "an excellent ability to meet their ongoing insurance obligations."
Are bonds from an A- rated surety still accepted? That depends on the obligee's rule, not on the outlook. Under a rule with an A- floor, an A- rating meets the floor. Under list-based systems such as Treasury Circular 570, ratings are not the test.
Does the US federal government use AM Best ratings for surety bonds? No. FAR 28.202 requires corporate sureties to appear in Treasury Department Circular 570, and bonds should not exceed the surety's stated underwriting limit unless coinsured or reinsured.
Does the Canadian federal government use a rating test for surety bonds? Canada's former federal contracting policy relied on regulator licensing, not credit ratings. That policy was rescinded, and the current Directive does not set a surety rating test. Check the solicitation's own security terms.
Does O. Reg. 461/24 apply to construction contract bonds? No. It applies to surety bonds that landowners and applicants choose to use as security for municipal conditions of land-use planning approvals under the Planning Act.
Is O. Reg. 461/24 an AM Best-only requirement? No. It accepts a minimum rating from any one of five agencies (DBRS, Fitch, Moody's, S&P or A.M. Best), and the insurer must also be licensed under Ontario's Insurance Act to write surety insurance.
How do I know which Western Surety Company is on my bond? Check the full legal name and home office address on the bond. The company in the October 15 release is based in Regina, Saskatchewan.
Retrieved or confirmed October 16, 2026 (PT).
