A.M. Best Upgrades Rating for Nonprofits’ Insurance Alliance of California

A.M. Best Co. has upgraded the financial strength rating to A (Excellent) from A- (Excellent) of Nonprofits’ Insurance Alliance of California (NIAC). The rating outlook is stable.

According to Best, the rating reflects NIAC’s sound capitalization, excellent operating performance driven by underwriting profitability and strong market presence in California. These positive rating factors are somewhat mitigated by NIAC’s limited product diversification and its geographical concentration, which increase the impact of competition and legislative changes.

NIAC is an insurance pool in California that provides liability insurance coverages tailored to the specialized needs of the nonprofit sector. The pool’s solid capitalization is supported by consistent earnings, conservative reserving practices and strong reinsurance protection. These factors also mitigate the potential impact of volatility from its concentration in liability coverages.

NIAC has registered underwriting profits the last five years, with an average combined ratio below 90%. It has maintained conservative leverage measures with a consistently growing book of business. Benefiting from its tax-exempt status and rising commercial insurance rates, Best reports that NIAC continues to produce excellent earnings with return on equity of more than 20% each of the past five years.

The rating also recognizes NIAC’s very high member retention derived from its understanding and focus on nonprofit organizations, expanding products and services and proactive loss control programs.

Further, while NIAC can only write business in California, management has implemented a diversification strategy to expand to other states with the creation of the Nonprofits Insurance Alliance Group. This expansion provides a number of benefits related to increasing scale and spread of risk.