Rating agency AM Best has revised the outlooks to negative from stable for Canopius US Insurance, Inc. and Canopius Reinsurance Limited.
At the same time, the rating agency affirmed both entities, which are wholly owned subsidiaries of Canopius Group Limited, a Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings of “a-” (Excellent).
AM Best attributes the negative revision to mounting pressures on Canopius’ balance sheet strength assessment.
It writes, “The group’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), decreased to the strong level from the very strong level as at year-end 2021 and is expected to have remained at the strong level through 2022.
“Although Canopius’ risk-adjusted capitalisation is expected to improve significantly in the near term, which would alleviate the negative pressure on the ratings, a negative rating action is likely if this does not occur.”
AM Best does note that Canopius’ underwriting results showed a moderate recovery in 2021, after underperforming from 2017-2020.
As for 2022, the rating agency anticipates the group to report a further improvement in underwriting performance, though it notes that overall results will be impacted adversely by unrealised fair value losses on fixed income investments.
Further, AM Best expects operating performance under the new leadership team to continue to benefit from actions taken to reduce exposure to natural catastrophe events, a strong rating environment, and better yields on the group’s investment portfolio.
It writes, “Canopius has a well-established business profile as a re/insurer in the Lloyd’s market, although it is subject to a strong level of competition.
“The group benefits from its partnership with Samsung Fire & Marine Insurance Co., Ltd., since 2019, which supports the group’s operations and growth in the U.S. and Asia-Pacific markets.”
A month before that announcement, the firm stated that it would be using Allphins’ software solution for treaty energy.
