AM Best has revised the outlooks to stable from negative of the members of GeoVera Insurance Group, which operate under an intercompany reinsurance agreement.
The credit rating agency also affirmed the Group’s Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a” (Excellent).
GeoVera Insurance Group’s members include Coastal Select Insurance Company, GeoVera Insurance Company, GeoVera Reinsurance, Ltd., and GeoVera Specialty Insurance Company.
According to AM Best, these ratings reflect GeoVera’s balance sheet strength, which it assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
The revised outlooks reflect AM Best’s expectation that GeoVera’s operating performance has improved to a sustainable level after having implemented a successful portfolio transformation over the previous two years, the rating agency noted.
AM Best said: “GeoVera has actively reduced its exposures in its Southeastern residential wind business, which prior to the portfolio transformation, were the primary source of the increased catastrophe (CAT) losses that led to the deterioration in the group’s operating results.
“The group has refocused toward growing its higher margin residential earthquake business in California, Oregon and Washington. Additionally, the group has expanded into commercial property and commercial earthquake lines through its newly formed partnerships with two leading managing general underwriters: AmRisc Group and Arrowhead General Insurance Agency, Inc.”
According to Best’s Capital Adequacy Ratio (BCAR), GeoVera’s very strong balance sheet strength is well-supported by its strongest level of risk-adjusted capitalization. It also has a as well as satisfactory capital quality and financial flexibility.
Furthermore, the group’s operating performance in 2022 and 2021 has generated healthy surplus growth, benefiting from a return to strong underwriting results in those years.
As a direct writer for earthquake risks, GeoVera faces the potential of high loss severity impacting its business, AM Best warned.
Adding: “However, this is mitigated through its comprehensive reinsurance program. The group augmented its traditional reinsurance program with sponsorship of its first 144A CAT bond with Veraison Re Ltd in December 2022. The CAT bond offers $150 million in reinsurance protection to GeoVera over a three-year term, maturing in March 2026.”
