Best’s News & Research Service - August 10, 2021 11:36 AM (EDT)
AM Best Upgrades Credit Ratings of Bondex Insurance Company
- August 10, 2021 11:36 AM (EDT)
Oldwick //BestWire// - AM Best has upgraded the Financial Strength Rating to B++ (Good) from B+ (Good) and the Long-Term Issuer Credit Rating to “bbb” (Good) from “bbb-” (Good) of Bondex Insurance Company (Bondex) (Florham Park, NJ). The outlook of these Credit Ratings (ratings) is stable.
These Credit Ratings (ratings) reflect Bondex’s balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
Bondex’s balance sheet strength is assessed as adequate despite the company having the strongest level risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s BCAR has increased over the past several years, driven by surplus growth supported by favorable underwriting results. However, various components of the balance sheet offset the strongest level BCAR such as a low level of surplus, high underwriting leverage, high reinsurance dependence and trailing liquidity metrics when compared with the industry.
Bondex’s adequate operating performance has been driven by favorable underwriting results in recent years, which has contributed to overall earnings and continued surplus growth. Despite the overall economic impact from the COVID-19 pandemic, the company produced net income in 2020 and posted solid total return metrics.
The limited business profile reflects the company’s single product line concentration in surety bonds and narrow geographic concentration with the majority of its business written in New Jersey. Offsetting these high concentrations is the company’s reputation in its market and management’s knowledge of the surety industry.
The rating upgrades reflect a change in AM Best’s assessment of Bondex’s ERM to appropriate from marginal. These upgrades follow the implementation of the company’s ERM framework and capabilities over recent years. Risk appetite and tolerances have been established and are reviewed annually by the board, along with current and emerging risks. Additionally underwriting reviews the top exposures regularly, but not less than monthly, and takes action when appropriate to reduce risk. In addition, the company has put into place an adequate reinsurance program supported by high quality reinsurers to support its surety bond business.
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 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.