AM Best affirms the Financial Strength Rating of ‘A-’ (Excellent) and the Long-Term Issuer Credit Rating of ‘a-’ (Excellent) of Sustainable Assurance Company (SAC). The outlook for these ratings is ‘stable’. SAC, a wholly owned captive subsidiary of Lancaster County Solid Waste Management Authority (LCSWMA) (Lancaster, PA), has its ratings affirmed in reflection of its strong balance sheet strength, strong operating performance, limited business profile, and appropriate enterprise risk management (ERM). The rating agency assesses SAC’s balance sheet strength as strong. This is supported by its very strong risk-based capitalisation (note: UK English spelling used as per guide ), as measured by Best’s Capital Adequacy Ratio (BCAR). While the company’s small surplus gives it a high retention to surplus ratio, which challenges its capital adequacy in stressed scenarios, this is offset by high quality capital, a conservative investment portfolio, and the explicit and implicit support from its parent, LCSWMA. The captive was founded in 2021. The parent company has a history of successful ERM practices, and the captive structure originated partly as a strategic alternative to the more volatile commercial insurance market. SAC projects modest underwriting profitability in each of the next five years, driven mainly by underwriting performance, with supplemental modest net investment income. AM Best considers SAC’s business profile to be limited because of its structure as a single-parent captive of LCSWMA. The captive’s concentration in a narrow product portfolio (property and terrorism coverage) and its geographic concentration in central Pennsylvania contribute to this assessment. The ‘stable’ outlooks reflect AM Best's expectation that SAC’s balance sheet strength will remain sustainable with supportive risk-based capitalisation. They also anticipate the captive will continue to generate strong operating performance in the near to intermediate term. AM Best states that positive rating action could occur if SAC’s balance sheet strength improves, driven by its ability to organically grow surplus from profitable operations. Conversely, negative rating action could occur if the balance sheet assessment weakens, reflecting higher-than-expected severity losses or a more aggressive stance in capital management.
