KEY RATING DRIVERS
Partially offsetting these positives is the company's status as a monoline company that primarily operates in the volatile medical professional liability (MPLI) line of business, which limits the upside of
The MPLI market's underwriting results outperformed other major commercial lines segments on a calendar year basis. However, more recently, MPLI accident year combined ratios have risen significantly.
The broader commercial lines market has experienced premium rate improvements for the last two years in response to underwriting losses. The MPLI segment has lagged in this pricing recovery and is unlikely to show material near-term rate improvement due to the market presence of many monoline MPLI writers that experienced strong capital growth in the last hard market but have limited underwriting opportunities outside of MPLI.
Fitch notes that
In particular, loss reserves are critically important for a MPLI company as the liability duration is amongst the highest in the property/casualty universe, with potential for reserve volatility due to changes in the litigation environment and inflation over time. After one year approximately 13% of all known claims are closed and after five years approximately 90% of claims are closed.
Within Fitch's rating rationale are multiple rating triggers. If
The following is a list of triggers that could lead to a downgrade:
--An increase in the company's operating leverage, as defined by net written premiums to policyholder surplus, of 1.0x or higher.
--Material adverse reserve development.
--A Prism capital model score below 'Strong' (currently 'Very Strong');
Fitch has affirmed the 'A' IFS ratings of the following
--Underwriter for the
Fitch has published the following IDR due to new surplus notes issuance on
Fitch has also affirmed the following debt issue:
Fitch has withdrawn the following entities as they no longer exist as they were merged into existing entities:
Additional information is available at 'www.fitchratings.com'.
--'Insurance Rating Methodology' (
Insurance Rating Methodology
Jim Auden, CFA, +1 312-368-3146
Source: Fitch Ratings
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