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Best’s News & Research Service - August 16, 2022 01:01 PM (EDT)

AM Best Downgrades Credit Ratings of Bankers Insurance Group’s Members

  • August 16, 2022 01:01 PM (EDT)

Oldwick //BestWire// - AM Best has downgraded the Financial Strength Rating to B+ (Good) from B++ (Good) and the Long-Term Issuer Credit Ratings to “bbb-” (Good) from “bbb” (Good) of the members of Bankers Insurance Group (Bankers). The group’s members are Bankers Insurance Company (St. Petersburg, FL) and its property/casualty subsidiaries, Bankers Specialty Insurance Company (Metairie, LA) and First Community Insurance Company (St. Petersburg, FL). The outlook of these Credit Ratings (ratings) is negative.

The ratings reflect Bankers’ balance sheet strength, which AM Best assesses as strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM).

The downgrade of Bankers’ ratings reflects ongoing surplus deterioration and continued challenges in reserve development. Bankers has reported surplus declines in four of the last five years due to elevated underwriting losses. This trend has continued with additional declines in surplus through the first half of 2022. Reserves, which continue to develop adversely, have been influenced in more-recent years by widespread inflation pressures in the homeowners line of business. Runoff lines, which previously had been driving adverse development, have begun to trend favorably due to years of reserves strengthening and a decline in exposures given their runoff status.

The negative outlooks are based on the aforementioned issues generating concern regarding the efficacy of Bankers’ ERM program against current and emerging risks. Bankers provides personal property coverage in Florida, Louisiana and South Carolina, all of which exposes the group to severe weather events associated with coastal states. Social inflation pressures, particularly in Florida, and significantly rising reinsurance costs have challenged the group’s performance. Management has responded by implementing a number of corrective actions, including nonrenewal of problematic risks and a strategic exit of personal lines in Florida, Louisiana and South Carolina. The exit from these segments may stabilize results as the homeowners line is driving much of the volatility seen over the past five years due to increasing storm frequency and severity. Prospectively, Bankers is looking to focus on commercial risks and surety (i.e., bail bonds), as both have produced adequate results for the group in the past. While these initiatives may favorably impact the risk profile and stabilize results, the ultimate effectiveness of these efforts and their impact on capital and operating performance remain uncertain.

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.

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