Rating agency AM Best has downgraded the Financial Strength Rating to B (Fair) from B+ (Good) and the Long-Term Issuer Credit Rating to “bb” (Fair) from “bbb-” (Good) of Kingstone Insurance Company (KICO).
Concurrently, AM Best has downgraded the Long-Term ICR to “b-” (Marginal) from “bb-” (Fair) and its associated securities for Kingstone Companies, Inc. (KINS), the insurance holding company of KICO.
The outlook of these Credit Ratings was revised to negative from stable. Concurrently, AM Best has withdrawn all of the public ratings of KINS.
AM Best’s downgrades of KINS & KICO follow shortly after it was recently reported that KBRA had downgraded and withdrawn all ratings from both companies.
Moreover, AM Best noted that the ratings of KICO reflect its balance sheet strength, which the rating agency assesses as adequate, as well as its adequate operating performance, limited business profile and marginal enterprise risk management (ERM).
Additionally, the ratings downgrade was driven by significant deterioration in KICO’s risk-adjusted capitalization that occurred across all return periods due to a sizeable increase in the net probable maximum loss (PML); this was a result of its latest reinsurance renewal, and a decline in surplus from weather-related losses and dividend payments in 2022.
AM Best also added that the sizeable differential in PMLs was driven by the dislocation in the catastrophe reinsurance markets in June, leading to management’s inability to secure the same limit as the prior year and purchasing substantially less catastrophe reinsurance as a result.
Therefore, this impact has resulted in AM Best revising KICO’s ERM assessment to marginal from appropriate.
The outlook change of these credit ratings to negative primarily reflects the deteriorating underwriting results for year-end 2021 and the first quarter of 2022 that were driven mainly by weather-related losses.
Lastly, AM Best stated that it considers KICO’s exposure to environmental, social and governance issues to be material due to its coastal concentration and associated climate risk with changing weather patterns.
