Ratings Recap: Chartis, C.P.A., Electric

A.M. Best Co. announced that it has affirmed the ratings of Chicago-based Chartis Specialty Insurance Company “in conjunction with its recent membership in the Lexington Insurance Pool. The company was previously a member of the Chartis U.S. Insurance Group. Best explained that the outlook for Lexington, whose rating is now applicable to Chartis Specialty, is negative. This rating action takes into consideration Lexington’s revised pooling agreement, under which Chartis Specialty became a 10 percent participant, which was approved on a retroactive basis as of January 1, 2010. The ratings of Lexington and Chartis U.S. remain unchanged.”

A.M. Best Co. has upgraded the financial strength rating to ‘B+’ (Good) from ‘B’ (Fair) and issuer credit rating to “bbb-” from “bb” of Michigan-based C.P.A. Insurance Company, both with stable outlooks. Best said the ratings reflect “C.P.A.’s change in ownership in 2008, as well as the replacement of the management team under the previous owner. Other positive rating factors are the low underwriting leverage and well-defined niche market, providing railroad workers job loss insurance for over 100 years. C.P.A. also has very strong capitalization as measured by its high Best Capital Adequacy Ratio (BCAR).” As offsetting factors Best noted “C.P.A.’s significant ownership interest in Premium Finance, Inc., which constitutes 60 percent of surplus at year-end 2009, and the potential inherent risk associated with the ramp up of the new business plan as C.P.A. enters new lines of business.” Best said the rating outlook recognizes C.P.A.’s “low underwriting leverage” and Best’s anticipation of “improved underwriting performance through the company’s focus on achieving expense efficiencies, while prudently growing its premium base. The new ownership plans for C.P.A. to expand into other lines of business as it obtains a full property and casualty license and gains admission into additional states. C.P.A. plans on reinsuring all of the risks on new lines of business, resulting in high ceded leverage and elevated credit risk.”

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A’ (Excellent) and issuer credit ratings (ICR) of “a” of Massachusetts-based Electric Insurance Company and its wholly owned subsidiary, Electric Insurance Ireland Ltd, which is based in Dublin, Ireland. The outlook for all of the ratings is stable. Best then withdrew the FSR of ‘A’ (Excellent) and ICR of “a” and assigned a category NR-5 (Not Formally Followed) to the FSR and an “nr” to the ICR of Electric Insurance Group, due to the dissolution of Electric Lloyd’s of Texas; and consequently, the group. Best said the ratings reflect Electric Insurance Company’s “solid capitalization, sustained operating profitability, low expense ratio, the reduced risk associated with retrospectively rated commercial policies, and the value-added commercial insurance services that the group provides General Electric Company.” The ratings also recognize the strategic importance of both companies to GE. Partially offsetting these positive rating factors are Electric Insurance Company’s “adverse loss reserve development and the limitation of its commercial lines business to one policyholder,” Best continued. “Although adverse loss reserve development in commercial lines has been recorded consistently, these lines are rated retrospectively. Thus, while profit potential is limited, risk also is reduced.”