Best’s News & Research Service - December 04, 2024 01:23 PM (EST)
AM Best Revises Issuer Credit Rating Outlook to Negative for Members of Nonprofits Insurance Alliance Group
- December 04, 2024 01:23 PM (EST)
//BestWire// - AM Best has revised the outlook to negative from stable of the Long-Term Issuer Credit Ratings (Long-Term ICRs) and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term ICRs of “a+” (Excellent) of Nonprofits Insurance Alliance of California, Inc. (Santa Cruz, CA), National Alliance of Nonprofits for Insurance, Inc. and Alliance of Nonprofits for Insurance, Risk Retention Group, Inc. (both of West Brookfield, VT) which all are members of Nonprofits Insurance Alliance Group (NIA or the group). The outlook of the FSR is stable.
The Credit Ratings (ratings) reflect NIA’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management.
The revised outlook of the Long-Term ICRs reflects a declining trend in NIA’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). The drop in BCAR primarily stems from significant adverse loss reserve development within the group‘s improper sexual misconduct liability, directors and officers liability and commercial auto liability lines of business, which were compounded by social inflation and higher jury verdicts. In recent years, the group has experienced substantial growth in premium, which has additionally impacted its BCAR. Furthermore, surplus growth was impeded due to unrealized capital losses on NIA’s fixed income investments, particularly in 2021 and 2022, placing pressure on the group’s underwriting leverage metrics. There is concern that additional stress may put strain on the balance sheet strength assessment in the future.
NIA’s operating performance is assessed as adequate. Prior to 2022, the group's underwriting and operating metrics maintained a high level of consistency; however, there has been deterioration in its metrics in more recent years driven by elevated loss and loss adjustment expenses. In response, management is taking numerous corrective actions such as targeted rate increases and non-renewing business in problematic areas to help improve results.
Negative rating action may occur if NIA’s risk-adjusted capitalization were to weaken to a level that is no longer supportive of its very strong balance sheet strength assessment. Negative rating action also may occur if there is continued deterioration in its operating performance that is no longer in line with adequate performance metrics. While unlikely in the intermediate term, positive rating action may occur following a sustained improvement in NIA's operating performance.
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 Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.