A.M. Best has withdrawn the ratings of SUMIT Insurance at the request of the Bermuda-based captive concurrent to a ratings downgrade.
The ratings agency has downgraded the financial strength rating from A (Excellent) to A- (Excellent) and the long-term issuer credit rating from “a” to “a-” of the captive, which is part of Stanford Health Care’s risk management strategy.
Simultaneously, A.M. Best has withdrawn the ratings at the request of the company to no longer participate in its interactive rating process.
The outlook of the downgraded credit ratings is stable.
SUMIT’s ratings are reflective of its “very strong” balance sheet strength, its marginal operating performance, limited business profile, and appropriate enterprise risk management.
The downgrades reflect a material decline in surplus during the captive’s fiscal-year 2018 due to significant adverse development on medical professional liability claims and a dividend payment.
Reserves increased by 45 percent from the previous year, while surplus declined by 33 percent, which increased underwriting leverage metrics.
Risk-adjusted capitalisation also declined significantly.
The captive retains $10 million per claim, which is high relative to surplus and leaves the company exposed to increases in frequency and severity claims.
SUMIT’s operating performance has been very volatile, and in four of the five previous years underwriting losses have been reported, including a substantial loss in 2018.
A.M. Best noted that, nevertheless, the captive “serves an important strategic purpose as a captive insurance vehicle for Stanford Health Care and benefits from the robust financial strength of its ultimate parent, Stanford University”.
