A.M. Best has upgraded the financial strength rating to “A (Excellent)” from “A- (Excellent)” and the issuer credit ratings to “a” from “a-” of LAMMICO and its sponsored risk retention group, LAMMICO Risk Retention Group, which is domiciled in the District of Columbia.
The outlook for all ratings has been revised to stable from positive.
The ratings reflect the group’s strong capitalisation driven by a conservative loss reserving philosophy, consistently favourable operating performance and high policyholder retention.
The ratings also recognise LAMMICO’s leadership position in providing medical professional liability insurance coverage to physicians and surgeons, other healthcare practitioners and healthcare facilities in Louisiana.
The companies benefitted from tort reform in 2012 establishing a maximum cap for non-economic damages. Significant reinsurance support is also provided to the RRG through a 95 percent quota share agreement with its sponsor, LAMMICO.
These positive attributes are partially offset by the inherent market risks associated with being largely a single state, mono-line medical professional liability insurer, as they relate to legislative and regulatory challenges, competition, loss-cost trends and price adequacy.
Other risk factors include the potential for successful challenges to tort reform or changes in the Louisiana Patient’s Compensation Fund (LPCF) to pay claims in Louisiana, as well as the potential for unprofitable expansion by the RRG.
These concerns are partially mitigated by a recent appeal on the constitutionality of the cap, which the State Supreme Court denied. However, future challenges to tort reform and potential changes to the LPCF may still occur.
The LPCF limits the group’s risk by taking a portion of the risk layer for an insured’s loss. While the group’s enhanced surplus position, reserve conservatism and lower per claim retention help protect against an adverse change to the cap or the LPCF, the legislative environment is stable for the near term, but remains susceptible to change.
