Best’s News & Research Service - December 10, 2015 03:15 PM (EST)
A.M. Best Revises Outlook to Stable for Members of the Fire Districts Insurance Group
- December 10, 2015 03:15 PM (EST)
Oldwick //BestWire// - A.M. Best has revised the outlook to stable from positive and affirmed the financial strength rating of B (Fair) and the issuer credit ratings of “bb+” of Fire Districts Insurance Company, Inc. and its wholly owned subsidiaries, FDM Preferred Insurance Company, Inc. and Fire Districts of New York Mutual Insurance Company, Inc. (all located in Chestnut Ridge, NY).
The change in outlooks for the three members of the Fire Districts Insurance Group (FDG) reflects the lack of positive movement in underwriting leverage and risk-adjusted capitalization. These measures had shown some improvement in recent years, but the level of improvement has slowed to insignificant levels while leverage has slightly increased during 2015.
The ratings reflect the group’s relatively modest risk-adjusted capitalization given the high level of reinsurance dependence and underwriting leverage as well as risk exposures generated by FDG’s sole line of business (workers’ compensation) in New York. Despite the group’s long history of generating reasonable operating returns and net income, risk-adjusted capitalization is constrained by FDG’s high dependence on reinsurance, which subjects the companies to reinsurer credit risk and dispute risk. Somewhat mitigating this concern is the high credit quality and the material level of collateral held for one of the group’s main reinsurers. Still, as single-state, single-line writers of workers’ compensation, the companies are also exposed to the vagaries of local politics as well as regulatory and legislative pressures.
This press release relates to rating(s) that have been published on A.M. 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 visit A.M. Best’s Ratings & Criteria Center.
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