The announcement from non-life specialty insurer R&Q Insurance Holdings earlier this week that its Board is conducting a strategic review to separate its program management and legacy businesses, has seen AM Best place the credit ratings of the firm and its rated subsidiaries under review with negative implications.
On April 4th, R&Q said that its Board is reviewing strategic alternatives to separate Accredited, its program management operation, and its Legacy Insurance division, as it feels a separation would set each entity on a “more favourable footing” to deliver profitable growth.
In response, global ratings agency AM Best has placed under review with negative implications the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” (Excellent) of Accredited Surety and Casualty Company, Inc. (ASC) (Orlando, FL), Accredited Specialty Insurance Company (ASI) (Phoenix, AZ) and Accredited Insurance (Europe) Limited (AIEL) (Malta).
In addition, AM Best has placed under review with negative implications the Long-Term ICR of “bbb-” (Good) of R&Q Insurance Holdings Ltd (R&Q) (Bermuda), the non-operating holding company of the group.
“The rating actions follow the announcement on 4 April 2023, that R&Q is reviewing strategic options to separate its program management and legacy insurance businesses, and that the group is expected to report a material operating loss for 2022,” says AM Best.
Previously, continues the rating agency, it had viewed the Accredited companies to be strategically important to the R&Q group, and will therefore undertake a review of the likely impact of the separation on their rating fundamentals.
“Furthermore, the expected operating loss for 2022, driven by R&Q’s legacy operations, will likely lead to a material weakening of the group’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR),” adds AM Best.
The ratings agency does also state that until it has sufficient clarity over the rating fundamentals of the Accredited companies and the broader R&Q group, the ratings of both are expected to remain under review.
“It is considered probable that in the near future, the Accredited companies will form an independent rating unit, separate from R&Q,” concludes AM Best.
