A.M. Best Co. has downgraded the financial strength rating to “B++ (Good)” from “A (Excellent)” and the issuer credit rating to “bbb+” from “a” of American Safety Risk Retention Group (RRG), based in Burlington, Vermont.
Both ratings have been removed from under review with negative implications and assigned a stable outlook.
The rating actions are based on American Safety RRG operating as a stand-alone entity as a result of the completion of the acquisition of its former publicly traded ultimate parent, American Safety Insurance (ASI) Holdings of Hamilton, Bermuda, by Fairfax Financial Holdings.
American Safety RRG was not a part of the acquisition and so will not be an affiliate of either one of the publicly traded entities going forward, according to A.M. Best.
The ratings reflect the benefits to American Safety RRG’s executed loss portfolio transfer and casualty excess of loss reinsurance contracts.
They are also based on A.M. Best’s expectation that American Safety RRG’s management will run the company in accordance with business plans shared with and evaluated by the rating agency.
Positive rating actions could occur if American Safety RRG succeeds in meeting or exceeding its operating plan of providing insurance solutions to protect specialty niche businesses against liabilities associated with environmental hazards, resulting in organic capital growth, balance sheet fortification and an enhanced business profile, explained A.M. Best.
The execution risk involved with American Safety RRG adding to its current book of business profitably is one of the key factors that could trigger negative rating actions, specifically if underwriting or operating results fall materially short of its plan.
Similarly, a failure to maintain adequate risk-adjusted capitalisation would also be a factor that would affect the company’s ratings adversely, added A.M. Best.
