Best’s News & Research Service - October 12, 2023 08:17 AM (EDT)
AM Best Affirms Credit Ratings of R.V.I. Guaranty Co., Ltd. and R.V.I. America Insurance Company
- October 12, 2023 08:17 AM (EDT)
Oldwick //BestWire// - AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of R.V.I. Guaranty Co., Ltd. (RVI Guaranty) (Bermuda) and its subsidiary, R.V.I. America Insurance Company (RVI America) (Delaware) (collectively known as RVI). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect RVI’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
RVI’s risk-adjusted capitalization level, financial flexibility, high credit quality investment portfolio and adequate liquidity position support AM Best’s balance sheet strength assessment of strongest. AM Best assesses RVI’s risk-adjusted capitalization at the strongest level on base and stress scenarios, as measured by Best’s Capital Adequacy Ratio (BCAR). R.V.I. Acquisition Holdings, LLC, a Delaware limited liability company, acquired RVI in May 2020, at which time RVI became affiliated with Group 1001 Insurance Holdings, LLC (Group1001). Following the acquisition, RVI gained access to the expertise in the broader family associated with Group1001, which could help in its investment, risk management, liquidity management and business development.
AM Best assesses RVI’s operating performance as adequate. The company has stable long-term earnings, along with historically low loss ratios, high expense ratios and combined ratios well-below 100%. The low loss ratios and high expense ratios are not unexpected for the residual value insurance products in which RVI was historically concentrated. As RVI expands into more traditional property/casualty lines of business, the loss ratios may rise naturally as the expense ratio falls. RVI has average annual earnings of $11.3 million over the past five years, and a five-year average combined ratio of 75.8%. RVI achieved these operating results while also growing its premium volume. RVI’s net premium written increased by approximately 37% in 2022 and approximately 14% in 2021. RVI’s entrance into traditional property/casualty reinsurance drove the premium increase in 2022. Passenger vehicle residual value insurance in China drove the increase in premium volume in 2021.
High product risk drives RVI’s limited business profile assessment. The company’s product risk associated with its residual value insurance segments is correlated highly with the broader macro-economy. Also, low-frequency and high-severity claims typically characterize the risk profile of RVI’s residual value insurance segments. However, RVI’s business profile benefits from a leading market position, little competition in the residual value insurance sector and high client retention rate. Historically, RVI was concentrated narrowly in residual value insurance product lines; however, in recent years, RVI is expanding opportunistically into new lines of business that may provide beneficial diversification in the future.
AM Best assesses RVI’s ERM as appropriate because the company has a formal ERM process that is commensurate with the size, nature and complexity of its business. In general, the company aligns its risk assessment capability with its risk profile. Management closely monitors the company’s risk profile and adjusts risk management goals to improve its risk exposure.
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.