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Casualty erosion prompts A.M. Best to downgrade Allied World rating

18th February 2019 - Author: Charlie Wood

The Long-Term Issuer Credit Ratings (Long Term ICR) of Allied World Assurance Company and its affiliates has been been downgraded by AM Best from a+ to a, while its Financial Strength Rating (FSR) of A (Excellent) has been affirmed.

allied-world-logoThe ratings agency has also downgraded the Long-Term ICR of Allied World’s parent, Allied World Assurance Company Holdings (Switzerland), from bbb+ to bbb, along with its downstream holding company Allied World Holdings Bermuda.

AM Best says this Long-Term ICR downgrade reflects erosion in the group’s commercial casualty profitability, which, over the past several years, has been subject to deteriorating loss ratio levels and adverse reserve development patterns

In addition, Allied World Holdings Bermuda has had its Long-Term Issue Credit Rating cut (Long-Term IR) from bbb+ to bbb.

AM Best says the outlooks of all the above ratings – which are reflected by the group’s balance sheet strength, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management – remains stable.

The commercial casualty market remains very competitive, AM Best says.

In addition, property losses have impacted underwriting performance over the same time period. While the volatility related to property losses have primarily impacted earnings, the losses in 2017 resulted in a reduction to capital.

Changes have reportedly been made in the group’s reinsurance structure to mitigate the impact of future catastrophe losses on its capital position.

AM Best says the group’s risk-adjusted capital is supportive of its current loss reserve position, which has shown some variability in recent accident years; premium growth; and catastrophe loss exposure.

Additionally, the ratings agency says Allied World benefits from being part of Fairfax Financial Holdings Limited’s diversified business platform, decentralised yet collaborative business practices, and fungible and strong capital position.

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