A.M. Best has downgraded the financial strength rating to “B (fair)” from “B+ (Good)” and issuer credit rating to “bb” from “bbb-” of National Contractors Insurance Company (NCIC)—a risk retention group (RRG) based in Bigfork, Montana.
The outlook for both ratings has been revised to negative from stable.
NCIC focuses exclusively on builders, contractors and sub-contractors. The RRG was formed specifically for the purpose of pooling contractor general liability risks; NCIC provides general liability insurance to builders and contractors across the US.
The rating action reflects NCIC’s significant decline in policyholders’ surplus and risk-adjusted capitalisation over the first half of 2013.
“The decline is attributed to a single claim, which fell outside of NCIC’s reinsurance coverage. While the company has maintained its underwriting discipline and management expects to recover much of the capital through litigation, NCIC’s current surplus level leaves it in a vulnerable capital position,” said the rating firm in a recent statement.
Other negative rating factors include NCIC’s concentration risk, particularly in California, and its dependence on reinsurance.
“Partially offsetting these negative rating factors is NCIC’s conservative management of its loss reserves and its niche business profile as a provider of contractors and artisans general liability coverage.”
