A.M. Best Co. has affirmed the financial strength ratings (FSR) of A- (Excellent) and assigned issuer credit ratings (ICR) of “a-” to Tower Insurance Company of New York (TICNY) and Tower National Insurance Company (TNIC) collectively referred to as Tower Group Companies (Tower). Concurrently, A.M. Best has assigned an ICR of “bbb-” to Tower Group, Inc. All rating outlooks are stable.
The financial strength rating of Tower reflects the group’s strong capitalization, consistently profitable underwriting results and demonstrated expertise in servicing a broad product offering to desired markets. Tower’s financial flexibility is currently strong due to its access to the capital markets and TWGP’S modest financial leverage and strong interest coverage measures.
After successfully completing its initial public offering in 2004, TWGP infused a significant amount of capital into the insurance operations of Tower. This enabled Tower to greatly reduce its dependence on reinsurance and write business previously placed by an affiliated managing general agent and written by third party issuing carriers.
These positive ratings factors are somewhat offset by the group’s aggressive growth on a direct and net basis, heavy geographic concentration in New York City and adverse loss reserve development on an accident year basis.
Since 2002, Tower has experienced minimal adverse development reflecting the group’s hiring of key actuarial staff and more conservatively establishing current accident year loss estimates. Although A.M. Best is concerned that Tower’s growth initiatives could place a strain on its operations and capital base, these concerns are somewhat mitigated due to the group’s historically strong underwriting results.
Due to the group’s concentration in New York City, Tower’s capital position is highly exposed to both natural and man-made catastrophe losses. A.M. Best has stress-tested Tower’s capitalization on a risk-adjusted basis.
The group’s capitalization withstood these stress-tests at current rating levels; however, A.M. Best will continue to monitor Tower’s risk management and data aggregation practices due to the sensitivity of the group’s capital base to catastrophe exposures.
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