AM Best has removed from under review with negative implications and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of members of the Vault Insurance Group. The outlook assigned to these Credit Ratings is negative.
The ratings reflect Vault’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
Charles Williamson, CEO of Vault, stated, “We are very proud of what we have accomplished and A.M. Best’s continued positive assessment of Vault’s financial strength.”
“Our strong financial foundation is important to us and our customers and ensures that we are able to continue to best serve our clients’ risk management needs.”
The ratings were placed under review with negative implications in April 2022 due to a material deterioration in its risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio, combined with significant volatility in operating performance.
Vault reported material capital erosion during the last nine months of 2021, which was influenced by significant weather losses (e.g., Hurricane Ida), large liabilities losses and reserve strengthening.
Full-year results also were influenced by Winter Storm Uri losses and one-time costs related to the separation from Allied World Assurance Company Holdings, Ltd, says Best.
Best notes that after the ratings were placed under review with negative implications, management implemented effective capital management initiatives that returned risk-adjusted capitalization to the strongest level, as measured by Best’s Capital Adequacy Ratio.
These actions included a $35 million capital contribution in the form of a surplus note to the reciprocal exchange and the purchase of increased catastrophe reinsurance coverage at the June renewal.
The overall balance sheet strength assessment also considers loss reserve development, which Best notes as favourable through the first six months of 2022.
The outlooks consider the impact of the recently implemented reinsurance program, says Best, while it is anticipated that the reinsurance program will reduce the severity of losses, underlying challenges remain that management is addressing through several corrective actions.
