AM Best recently downgraded the financial ratings of the members of the Non-profit Insurance Alliance Group (NIA) in Vermont and California. Its financial strength rating (FSR) was downgraded from A (excellent) to A- (Excellent), and its Long-Term issuer credit rating (Long-Term ICR) was downgraded from “a+” to “a-“. This adjustment reflects the decline in NIA’s risk-adjusted capital level and a significant reduction in its earnings in 2024, mainly due to the intensified adverse development of the loss provisions from the previous year, involving business areas such as liability for misconduct, directors’ and executives’ liability.
The downgrade of the rating is also attributed to the deterioration of the underwriting leverage indicator caused by the rapid growth of NIA premiums and the decline in the BCAR score. Although the management has taken measures such as raising the rate and modifying the limit, AM Best believes that these adjustments may take a relatively long time to take effect. Therefore, it has adjusted its business condition assessment from “positive” to “neutral”. The negative outlook reflects concerns over the continuous deterioration of NIA’s underwriting performance in recent years.
AM Best stated that if NIA’s operating performance further declines or there are significant adverse reserve changes, the rating may be downgraded again. Conversely, if sustained organic surplus growth can be achieved and reserves can be stabilized, an upgrade in the rating may be expected in the future. The non-profit insurance alliance members involved in this rating adjustment include national branches as well as those in California and Vermont.
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