On the question “why seven credit quality steps replace the previous six credit quality steps scale”:
The seven CQS are required by Article 3 of the Commission Delegated Regulation (EU) 2015/35, supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II). The banking framework however requires a six CQS scale.

On “the meaning of the rating category relevant to credit quality step 0”:
According to Annex I of the ESAs’ Joint Consultation Paper JC/CP/2015/001 on Draft Implementing Technical Standards on the allocation of credit assessments of ECAIs to an objective scale of credit quality steps under Article 109 (a) of Directive 2009/138/EC (available under https://eiopa.europa.eu/Publications/Consultations/JC%20CP%202015%20001…) of 6 Mar 2015, CQS 0 has the meaning “The rated entity has extremely strong capacity to meet its financial commitments and is subject to minimal credit risk.” The reference meanings were not part of the draft ITS at the time of submission by the ESAs to the European Commission.

On the question “why the higher Financial Strenght Rating in the Am Best Scale is equivalent to credit quality step 1 (so it is weaker than higher Financial Strenght Rating in the S&P’s scale)”:
The Solvency II ECAI mapping methodology considered in particular the following aspects:
•    the mandate for the JC: the mapping in the insurance framework should be consistent with the mapping in the banking framework;
•    the differences between the banking and insurance framework;

The meaning of CQS 1 in the insurance framework is “The rated entity has very strong capacity to meet its financial commitments and is subject to very low credit risk. ” according to the same source as mentioned in the answer to the preceding question. This expresses the high standard that is associated with rated assets in this CQS.
Like the other rating categories (e.g. long-term), the considered ECAI’s financial strength ratings had to be assigned to the required seven rating classes (CQS 0 to 6). For consistency reasons, the mapping has not been directly done using the final rating table of each ECAI, but also the underlying data. In other words, the mapping has been done according to rating data such as the default probabilities used by the ECAI to develop their ratings. Those data have either been provided by the ECAI itself or were retrieved from ESMA’s CEREP rating database (https://cerep.esma.europa.eu/cerep-web/). The mapping should be consistent across the different rating providers, the different rating categories for each provider and for all seven CQS, including the two top steps 0 and 1. Thus, the average or most frequent step assigned within the long term ratings category served, among other factors, as a measure for the corresponding financial strength rating. Further details on the methodology used to assign each level of rating proposed by any rating agency to their CQS category can be found in the Mapping Reports for the different ECAIs under https://eiopa.europa.eu/Pages/Consultations/JCCP201401add-Addendum-to-t….