AM Best has downgraded the financial strength rating to ‘B-’ (Fair) from ‘B++’ (Good) and the long-term issuer credit rating to ‘bb-’ (Fair) from ‘bbb+’ (Good) of Cadence Indemnity Inc. (Cadence). The ratings for the Texas-domiciled single-parent captive were placed under review with negative implications before being withdrawn at the company’s request. The rating downgrades reflect a weakening in the balance sheet strength of Cadence, driven by a significant decline in risk-adjusted capitalisation and increasing underwriting leverage metrics. According to the rating agency, Cadence experienced premium growth in the latter half of 2025 that substantially deviated from the business plans originally shared when the company was initially rated in March 2025. Consequently, the captive’s underwriting risk materially increased, leading to a significant decline in its Best’s Capital Adequacy Ratio (BCAR) score. The rating actions also reflect a revision in the assessment of the enterprise risk management (ERM) of Cadence from ‘appropriate’ to ‘marginal’. AM Best assesses the captive’s balance sheet strength as weak, its operating performance as adequate, and its business profile as limited. Operating as a single-parent captive, Cadence provides coverage for a diversified portfolio of risks from several commonly owned operating companies. The ratings remain under review with negative implications pending further meetings with management to evaluate the firm’s ERM framework and risk mitigation strategies. The review also awaits the receipt of a revised business plan, the filing of 2025 statutory financial statements and the finalisation of a year-end actuarial review.
