News Column

A.M. Best Affirms Ratings of Castle Key Group Members

August 1, 2014



OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Besthas affirmed the financial strength rating (FSR) of B- (Fair) and the issuer credit ratings (ICR) of “bb-” of the members of Castle Key Group (Castle Key) (headquartered in St. Petersburg, FL). The outlook for all ratings is negative. (See below for a detailed listing of the companies.)

The ratings and outlook reflect Castle Key’s poor overall capitalization when measured on a catastrophe stress-tested basis and geographic business concentration resulting in a susceptibility to catastrophic loss accumulation. Castle Key is the dedicated Florida property writer for its parent company, Allstate Insurance Company (Allstate), and it maintains significant exposure to hurricanes, with a corresponding substantial reliance on catastrophe reinsurance. In addition, Castle Key’s reinsurance program relies heavily upon the Florida Hurricane Catastrophe Fund (FHCF).

These negative rating factors are partially offset by Castle Key’s recently improved operating performance, which has been positively impacted by favorable loss activity due to increased rates and an absence of any hurricane events.

A.M. Best deviated from its “Rating Members of Insurance Groups” rating criteria by providing more than two FSR levels of rating enhancement to Castle Key’s stand-alone assessment. However, the additional rating enhancement acknowledges the historical financial and operational support provided to Castle Key as part of the Allstate organization. Although Castle Key is separately capitalized and not reinsured by Allstate, in A.M. Best’s opinion, parental support regarding the claims-paying ability of Castle Key will be maintained commensurate with its rating level in the event of frequent and/or severe hurricane activity. If parental support is not provided, it would be necessary for A.M. Best to re-evaluate the current FSR of A+ (Superior) and ICRs of “aa-” of Allstate and all the remaining members of the Allstate Insurance Group.

Future positive rating actions may result if Castle Key maintains favorable underwriting trends along with capital accumulation. However, negative rating actions could result if parental support is not provided in the case of multiple significant events.

The FSR of B- (Fair) and ICRs of “bb-” have been affirmed for the following members of the Castle Key Group:

  • Castle Key Insurance Company
  • Castle Key Indemnity Company
  • Encompass Floridian Insurance Company
  • Encompass Floridian Indemnity Company

    The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

    A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

    Copyright © 2014 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.




    A.M. Best Company

    Michael T Venezia,908-439-2200, ext. 5034

    Senior Financial Analyst

    michael.venezia@ambest.com

    or

    Gary Davis,908-439-2200, ext. 5665

    Assistant Vice President

    gary.davis@ambest.com

    or

    Christopher Sharkey, 908-439-2200, ext. 5159

    Manager, Public Relations

    christopher.sharkey@ambest.com

    or

    Jim Peavy, 908-439-2200, ext. 5644

    Assistant Vice President, Public Relations

    james.peavy@ambest.com

    Source: A.M. Best Company


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