Press Release - MAY 03, 2019
AM Best Withdraws Credit Ratings of SUMIT Insurance Company Ltd.
FOR IMMEDIATE RELEASE
OLDWICK - MAY 03, 2019
The ratings reflect SUMIT’s balance sheet strength, which AM Best categorizes as very strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management.
The downgrades reflect a material decline in surplus during the company’s fiscal-year 2018 due to significant adverse development on medical professional liability (MPL) claims as well as a dividend payment. Reserves increased by 45% from the prior year while surplus declined by 33%, which increased underwriting leverage metrics. Commensurately, risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), declined significantly. SUMIT effectively retains $10 million per claim, which is high relative to surplus, and leaves the company exposed to increases in frequency and severity of claims.
Operating performance has been very volatile, with underwriting losses reported in four of the most recent five years, including a substantial loss in 2018. Nevertheless, the company serves an important strategic purpose as a captive insurance vehicle for Stanford Health Care and benefits from the robust financial strength of its ultimate parent, Stanford University.
AM Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated in the United States and throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive .
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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