Best’s News & Research Service - July 25, 2025 08:57 AM (EDT)
AM Best Downgrades Credit Ratings of Oxford Insurance Companies’ Members; Places Credit Ratings Under Review With Developing Implications
- July 25, 2025 08:57 AM (EDT)
//BestWire// - AM Best has downgraded the Financial Strength Rating (FSR) to A- (Excellent) from A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) to “a-” (Excellent) from “a” (Excellent) for the members of Oxford Insurance Companies (Oxford). Concurrently, AM Best has placed these Credit Ratings (ratings) under review with developing implications. See below for a detailed listing of members and ratings.
The ratings reflect Oxford’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and marginal enterprise risk management (ERM).
The rating action reflects the lowering of Oxford’s ERM assessment to marginal from appropriate, which is directly related to the organization’s elevated risk appetite and tolerance, when it uncharacteristically added large limit, multi-year policies covering loans related to judgment preservation in the form of financial guarantees. The line has since been discontinued and exposure to potential losses continues to be lessened via collateral and voluntary paydowns. However, these policies are longer tail by their nature and are often extended prior to maturity.
AM Best’s ERM assessment of marginal also considers the following: actions taken by management to move these contracts offshore pending customary regulatory approvals; the protracted distractions caused by these events; and the eventual unwinding of this new structure. Management's sub-optimal level of transparency to its stakeholders was also a factor in that the policies introduced were significantly out-sized relative to the business taken on by the unified pool, leaving the pool potentially exposed to approximately $1.2 billion in aggregate exposure. However, Oxford’s management is in process of unwinding the policies previously ceded to a newly formed Bermuda cell company after the North Carolina regulator did not permit the transaction. As part of the sale to Brown & Brown insurance brokerage, an escrow fund is expected to be established covering up to $750 million of losses and expenses related to this business with only $15 million ceded to the unified pool in each of the next five years.
Aside from the financial guarantee business, the vast majority of Oxford’s business is very well managed with governance and ERM practices in line with its risk profile. Active cell surveillance and monitoring are required. The assessed framework component is comprehensive and in use throughout the rating unit, an infrastructure of approximately 500 active cells integrated via a unified pool. Cell oversight and management are intensive. Oxford uses operational controls, investment controls and collateralization to protect all cell owners. That said, however, Oxford’s business profile assessment may be negatively impacted in the event the company is unable to retain existing members and/or attract new ones, in light of management’s actions related to the handling of the judgment preservation/financial guarantee policies.
AM Best expects that the Oxford companies will continue to generate strong operating performance and maintain very strong balance sheet strength across the platform and respective cells. The active cells remain very strongly capitalized individually and collectively with strong operations. AM Best will continue to monitor Oxford's unified pool for unexpected deviations in risk appetite and tolerance.
The ratings have been placed under review with developing implications as Oxford's ultimate parent, RSC Topco, announced it is being acquired by Brown & Brown with a closing date in the third quarter of 2025. The developing implications status reflect potential risks if the impending acquisition does not close or materially changes, particularly as it relates to any changes in the business. This includes synergies to be gained by being part of a larger insurance group, as well as the benefits afforded by the newly anticipated escrow liquidity arrangement, which is intended to significantly mitigate Oxford’s unified pool from a sizable aggregate financial guarantee exposure.
The ratings will remain under review pending the close of the transaction and further discussions with management regarding any prospective changes to Oxford’s current business and or future business strategy, any synergies to be derived from the transaction and any explicit financial support to be provided including the anticipated and formally executed escrow agreement prior to closing.
The FSR has been downgraded to A- (Excellent) from A (Excellent) and the Long-Term ICRs to “a-” (Excellent) from “a” (Excellent) and placed under review with developing implications for the members of Oxford Insurance Companies:
· Oxford Insurance Company LLC
· Oxford Insurance Company TN LLC
· Oxford Insurance Company NC LLC
· Oxford Insurance Company MT LLC
· First Community Bankers Insurance Company, LLC
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.