AM Best Downgrades Bankers Credit Ratings

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AM Best Downgrades Bankers Credit Ratings

The credit ratings of the Bankers Insurance Group’s members have been reduced by AM Best.

The company said that it was upgrading the Long-Term Issuer Credit Ratings to “bbb-” (Good) from “bbb” and the Financial Strength Rating to B+ (Good) from “B++” (Good). Bankers Insurance Company, along with its P&C subsidiaries Bankers Specialty Insurance Company and First Community Insurance Company, are the group’s members. According to AM Best, these credit ratings have a poor outlook.

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According to AM Best, the reflect Bankers’ weak operating performance, narrow business profile, and ineffective enterprise risk management in addition to their good balance sheet strength, which AM Best rates as strong (ERM).

“The lowering of Bankers’ ratings reflects persistent surplus deterioration and ongoing issues in reserve creation,” AM Best stated in a statement. Bankers reported declining surpluses in four of the previous five years as a result of significant underwriting losses. Through the first half of 2022, this pattern of surplus decreases persisted.

AM Best Downgrades Bankers Credit Ratings

It added: “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 favourably due to years of reserves strengthening and a decline in exposures given their runoff status.”

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AM Best said the negative outlooks are based on 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.

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Bankers management has responded to issues within the market 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.

AM Best Downgrades Bankers Credit Ratings

AM Best said that the exit from these segments may stabilise results as the homeowners line is driving much of the volatility seen over the past five years due to increasing storm frequency and severity.

It said that Bankers may look 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 favourably impact the risk profile and stabilize results, the ultimate effectiveness of these efforts and their impact on capital and operating performance remain uncertain.

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