Following the completion of the 2008 hurricane season, A.M. Best Co. has removed from under review and affirmed several insurers’ ratings it had issued in October when there was concern over the insurers’ exposure to the state’s hurricane fund in a time of credit market difficulties.
No catastrophes occurred through the end of the season, which could have adversely impacted Florida Hurricane Catastrophe Fund’s (FHCF) ability to fund its claims-paying capacity. Due to the recent considerable contraction in the credit markets, the FHCF announced in October a revision to its estimated claims-paying capacity, as a large portion of its capacity relies on potential bond issuances. These actions prompted A.M. Best to place the ratings under review on Oct. 29, 2008, as the rated entities’ catastrophe reinsurance programs rely significantly on the FHCF.
However, as no catastrophe occurred, A.M. Best decided there was no adverse impact on the entities’ risk-adjusted capitalization, based on a reduction in the potential coverage available from the FHCF. Therefore, A.M. Best is reverting back to the opinions it had on the entities regarding the financial strength rating (FSR), issuer credit rating (ICR) and outlooks, which it had prior to FHCF’s announcement.
A.M Best said it will will continue to monitor the capacity of the FHCF given the evolving credit market conditions and said this will be a critical component of its analysis of insurer’s risk-adjusted capitalization, particularly with regards to the development of the 2009 reinsurance programs. The rating agency said aAny potential gaps in coverage with regards to FHCF capacity will be incorporated into its analysis prior to start of the 2009 hurricane season.
A.M. Best affirmed the following rated entities’ FSRs and ICRs:
Allstate Floridian Insurance Group — FSR of B+ (Good) and ICR of “bbb-” with a negative outlook
Argus Fire & Casualty Insurance Company — FSR of C- (Weak) and ICR of “ccc-” with a negative outlook
Omega Insurance Company — FSR of B (Fair) and ICR of “bb” with a negative outlook
Safeway Property Insurance Company — FSR of B (Fair) and ICR of “bb +” with a stable outlook
Tower Hill Preferred Insurance Company — FSR of B (Fair) and ICR of “bb” with a negative outlook
Tower Hill Prime Insurance Company — FSR of B (Fair) and ICR of “bb” with a negative outlook
United Automobile Insurance Group — FSR of B- (Fair) and ICR of
“bb-” with a stable outlook
Source: Best’s Ratings
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