Persistent underwriting losses drive downgrade of Chestnut Hill-based insurer
Rating agency AM Best has downgraded the Financial Strength Rating of Arrow Mutual Liability Insurance Company to B++ (Good) from A- (Excellent) and lowered the insurer’s Long-Term Issuer Credit Rating to “bbb+” (Good) from “a-” (Excellent). The outlook for both ratings was revised to stable from negative.
AM Best said the ratings reflect Arrow’s “very strong” balance sheet strength, along with its marginal operating performance, limited business profile and appropriate enterprise risk management.
According to the rating agency, the downgrade reflects Arrow’s “persistent underwriting and operating losses,” noting that the company generated an underwriting gain in only one of the past 10 years.
2024 results aided by reserve activity
AM Best said Arrow reported favorable results in 2024, but those results were supported by “non-recurring reserve activity.” The agency said results deteriorated in 2025, when the insurer reported an underwriting loss partly driven by elevated expenses related to the former CEO’s estate lawsuit, which was settled in 2025.
The rating agency stated that Arrow’s results compare unfavorably with insurers assessed at the adequate operating performance level and are instead more consistent with AM Best’s marginal operating performance assessment.
Balance sheet remains a strength
Despite the downgrade, AM Best said Arrow maintains balance sheet strength supported by its strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), at year-end 2025.
The agency also cited liquidity metrics that compare favorably with the industry. AM Best noted that Arrow’s BCAR has remained at the strongest level despite surplus declines in recent years.
However, AM Best said those strengths are partially offset by historical surplus volatility, limited financial flexibility and the company’s dividend-oriented operating model.
Massachusetts concentration cited
AM Best said Arrow’s limited business profile reflects its narrow focus as a monoline workers’ compensation insurer, its limited number of policyholders and its geographic concentration in Massachusetts.
The rating agency added that Arrow’s enterprise risk management practices are appropriate for the company’s size and focused risk profile, citing policyholder selection, underwriting and loss control measures, as well as the use of third-party specialists.
