AM Best announced on August 6th that it has downgraded the Financial Strength Rating as well as the Long-Term Issuer Credit Rating of the Kingstone Insurance Company. According to the official release, the rating agent revised the insurer’s FSR to B+ (Good) from B++ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “bbb-” (Good) from “bbb” (Good).
Concurrently, AM Best downgraded the Long-Term ICR to “bb-” (Fair) from “bb” (Fair) and its associated securities for Kingstone Companies Inc. (KINS) (Delaware), the insurance holding company of KICO. The outlook of these Credit Ratings also was revised to stable from negative. According to AM Best, the reasons for the downgrade included the following:
The ratings downgrade is driven by a revision of KICO’s operating performance assessment to adequate from strong that reflects volatility in underwriting results in recent years, caused by weather-related losses and loss reserve strengthening. While management has implemented a series of initiatives such as rate increases, exiting of commercial lines and modernizing product, technology and processes all designed to improve future operating performance, the degree of demonstrated volatility in performance is no longer indicative of the previous strong assessment.
KICO maintains an adequate level of risk-adjusted capitalization, which is heavily influenced by high gross catastrophe leverage that is reduced to a moderate level net of reinsurance for lower return periods, but is elevated further on the tail. The company’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), showed modest improvement at year-end 2020 and year-to-date 2021, driven by lower growth in direct premium written but the company’s geographic concentration and net retention levels in severe event scenarios remain a rating concern. Management has taken a number of strategic initiatives to control its coastal exposures by utilizing catastrophe modeling software to measure and control average annual loss on individual risks, implementation of deductibles and more granular risk scoring metrics.
