The mutual insurance company was founded in Rhode Island in 1800
A.M. Best announced this month that it has revised the outlook of the Providence Mutual Fire Insurance Company (Providence Mutual). This is the second New England regional insurer, since the start of 2016, that has received an adjusted outlook from AM Best as a result of last year’s winter storm losses.
While the rating agency changed its outlook on Providence Mutual from stable to negative, it affirmed the financial strength rating of the mutual insurer of A- (Excellent). It also affirmed the company’s issuer credit rating of “a-“.
Revised outlook reflects unprofitable underwriting results of past years
According to AM Best, the revised outlook reflects the mutual insurer’s elevated expense ratio as a result of “persistent significant weather events over the past several years. In particular, the rating agency points to the start of 2015, “…when the New England region experienced several weeks of record-setting snowfall and freezing temperatures.”
AM Best noted that Providence Mutual’s high geographic concentration of property risks in New England made the mutual insurer particularly vulnerable to the winter events occurring last year. AM Best has stated that while the company’s policyholder’s surplus is likely to decline in 2015, the mutual insurer has protected itself by continuing to maintain an adequate risk-adjusted capital position as a result of its below average underwriting leverage.
AM Best also noted that management has mobilized by working to reduce the impact of future weather events on the company’s overall performance and capitalization. Accordingly, it praised the fact that both a comprehensive reinsurance program as well as an aggressive pricing and underwriting strategy has been implemented as part of the mutual insurer’s risk management process.
As a result, AM Best concludes that a negative rating action could only occur if frequent and severe weather events continue to impact Providence Mutual’s underwriting performance or if any other market disruptions arise thereby causing further operating losses thereby negatively impacting risk-adjusted capitalization.
More about Providence Mutual
Headquartered in Rhode Island, the 210-year-old Providence Mutual Insurance Company is the fifth oldest insurance company in the United States. The mutual insurer currently provides personal and commercial insurance protection to over 70,000 policyholders throughout New England, New York, and New Jersey. The company is led by Sandra G. Parrillo, CPCU, the President and Chief Executive Officer of the Providence Mutual Insurance Company. She was named the Insurance Professional of the Year by the Insurance Library Association of Boston in 2011.