AM Best has downgraded the financial strength rating of members of Oxford Insurance Companies to ‘A-’ (Excellent) from ‘A’ (Excellent), alongside a corresponding downgrade of its long-term issuer credit ratings to ‘a-’ (Excellent) from ‘a’ (Excellent). The ratings have also been placed under review with developing implications. The decision reflects a revised assessment of Oxford’s enterprise risk management (ERM) from ‘appropriate’ to ‘marginal’. According to AM Best, the downgrade is driven by Oxford’s temporary expansion into financial guarantee business via large-limit, multi-year policies linked to judgment preservation loans — a line that has since been discontinued. While the group’s balance sheet strength remains assessed as ‘very strong’ and operating performance as ‘strong’, the unexpected deviation in risk appetite raised concerns around transparency and governance. At one point, Oxford’s unified pool faced potential exposure of approximately US$1.2 billion due to the size and scope of the financial guarantee contracts. AM Best notes that Oxford is actively unwinding these exposures and that an escrow fund of up to US$750 million is expected to be established as part of the company’s pending sale to Brown & Brown. Only US$15 million is expected to be ceded to the unified pool annually over the next five years. Oxford’s structure, which includes over 500 active cells operating via a unified pool, remains sound, with strong collateralisation and oversight practices in place. The captive’s core operations are described as “very well managed”, but AM Best cautioned that Oxford’s business profile could face pressure if the fallout from this issue affects member retention or future growth. The ratings remain under review as AM Best awaits finalisation of the Brown & Brown acquisition, expected to close in Q3 2025.
