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AM Best withdraws credit ratings of Tower Hill Prime

29th September 2022 - Author: Jack Willard

Global ratings agency AM Best has announced that it 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 Tower Hill Prime Insurance Company.

am-best-logoThe outlook of these Credit Ratings is negative.

Concurrently, AM Best has withdrawn these ratings as the company has requested to no longer participate in AM Best’s interactive rating process.

AM Best states that the ratings reflect Tower Hill Prime’s balance sheet strength, which the ratings agency assesses as adequate, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM).

At the same time, the downgrade of Tower Hill Prime’s Long-Term ICR reflects a significant decline in the company’s overall risk-adjusted capitalization, as measured by the Best Capital Adequacy Ratio (BCAR), to the very strong level from the strongest level, coupled with continued surplus erosion and elevated financial leverage of the holding company.

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AM Best notes that while Tower Hill Prime has benefitted from capital contributions through the holding company and the issuance of surplus notes, the quality of operating company capital has deteriorated as surplus notes currently make up more than half of Tower Hill Prime’s second quarter 2022 surplus.

Furthermore, Tower Hill Prime also continues to face challenges in adequately setting reserves.

At the same time, the negative outlooks reflect AM Best’s concern related to the effectiveness of current risk mitigation strategies as they relate to Tower Hill Prime’s ERM assessment and the execution risk of exiting the volatile Florida personal lines segment.

Tower Hill Prime has planned to non-renew about 50% of its Florida personal lines business by the end of 2022 and completely exit the segment by 2023.

Best concludes that the negative outlooks reflect pressure on the company’s operating performance with the severity of recent results not aligning with AM Best’s assessment of marginal.

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