AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a” of the rated operating subsidiaries of James River Group.
The ratings agency has also revised the outlook to negative from stable and affirmed the Long-Term ICR of “bbb” of James River Group.
Am Best notes that these ratings reflect the group’s balance sheet strength, which it assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The revised Long-Term ICR outlook follows the announcement of adverse reserve development within the commercial auto line in James River Group excess and surplus segment and to a lesser extent the group’s casualty reinsurance segment.
Specifically, the reserve development within the commercial auto line is described as involving a significantly sized account that has been placed in runoff.
The Long-Term ICR outlook captures AM Best’s concerns with the group’s balance sheet strength, given the recurring nature of the reserve development for the group’s commercial auto line account.
AM Best’s view is that long-term mitigation of the impact of this account is necessary to demonstrate stability in the group’s reserves and consistent risk-adjusted capital levels.