A.M. Best has assigned a financial strength rating of “A-“ (Excellent) and an issuer credit rating of “a-” to Knight Specialty Insurance Company (KSIC). The outlook assigned to these ratings is negative.
KSIC is a wholly owned subsidiary of Knight Insurance Company (KIC) based in Grand Cayman, Cayman Islands.
The agency has stated that the assigned ratings reflect KSIC’s sound business plan, supportive risk-based capitalisation and its strong reinsurance protection.
Reinsurance protection in the form of a 100 percent quota share agreement with the parent, KIC, allows KSIC to obtain the same ratings as KIC.
The ratings also reflect A.M. Best’s expectation of a “modest” operating performance, as KSIC is a start-up company. Also supporting the ratings is what A.M. Best has deemed a “favourable” business plan that is used as a basis for the rating’s profitability and liquidity metrics.
A.M Best commented: “Partially offsetting these positive rating factors are the start-up nature of KSIC, its limited market scope and business profile, execution risk associated with the implementation of the company’s business plan, the potential impact of continued soft market conditions and the fierce competition on the business in which the company plans to participate.”
Additional offsetting factors are concerns of KIC’s heightened execution risk due to significant business growth in 2013 and the uncertainty regarding loss-reserve and premium adequacy from this new business.
A.M. Best has claimed that the negative outlook represents continuing concerns regarding execution risk and uncertainty regarding loss-reserve and premium adequacy from this new business.
The agency has stated that positive rating actions are unlikely in the near term. However, the rating outlook for KSIC could be revised upward if KIC’s operating results continue to perform well for a sustained period in conjunction with evidence of measurable improvements in executing its new business, while maintaining supportive capitalisation.
