Specialty property and casualty insurance company Hallmark Financial Services, Inc. has announced its exit from Binding Primary Auto business due to mounting claims severity from prior accident years.
Despite several years of implementing proactive rate actions and policy changes, the company has decided to place its in-force policies into run-off.
Additionally, Hallmark Financial revealed that its annual insurance statutory reports will include pre-tax adverse loss development of $63.8 million, net of reinsurance, for 2019, of which $56.1 million was recorded in Q4.
The company explained that these losses are primarily related to the Binding Primary Auto business for the 2016 and 2017 underwriting years, with a smaller remainder largely attributable to general liability.
“Over the past few years, we have worked diligently to diversify our business mix in specialty insurance, while continuing to work to improve our binding auto results to a level of sustainable profitability,” said Naveen Anand, President & CEO of Hallmark Financial.
“Ultimately, we have seen greater than expected claim severity throughout all of commercial auto and made the decision to fully focus on our growing specialty lines.”
“By exiting this book of business and focusing on our core specialty lines, the Company can continue to write profitable business without the continued strain on our results,” Anand explained.
“In the coming months, we will continue to work with our agency partners to assist in the transition from binding auto, and evaluate reinsurance options that help to facilitate an orderly exit, such as an adverse development cover or loss portfolio transfer, to mitigate future volatility associated with this book of business.”
Hallmark Financial’s Binding Primary Auto portfolio represented approximately $114 million of the company’s gross written premiums for 2019.
In recent years, the insurer has already taken actions to scale back its Binding Primary Auto line, including a reduction of 60% in total policies in-force since 2016 (from over 10,000 to approximately 4,200 at year-end 2019).
In line with state regulatory guidelines, the Hallmark Financial will non-renew all policies and expects this business to fully run-off by the second quarter of 2021.