AM Best has downgraded the financial strength rating to B+ from B++ and the long-term issuer credit rating to “bbb-” from “bbb” for Kingstone Insurance Company (KICO) of Kingston, New York.
Concurrently, AM Best has downgraded the long-term ICR to “bb-” from “bb” and its associated securities for Kingstone Companies Inc. (KINS) of Delaware, the insurance holding company of KICO. The outlook of these credit ratings was revised to stable from negative.
Kingstone is a northeast regional property/casualty insurance holding company whose principal operating subsidiary is KICO. KICO is a New York domiciled carrier writing business through retail and wholesale agents and brokers. It offers primarily personal lines insurance products in New York, New Jersey, Rhode Island, Massachusetts and Connecticut. Kingstone is also licensed in Pennsylvania, New Hampshire and Maine.
The ratings of KICO reflect its balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
The ratings downgrade is driven by a revision of KICO’s operating performance assessment to adequate from strong that reflects volatility in underwriting results in recent years, caused by weather-related losses and loss reserve strengthening. While management has implemented a series of initiatives such as rate increases, exiting of commercial lines and modernizing product, technology and processes all designed to improve future operating performance, the degree of demonstrated volatility in performance is no longer indicative of the previous strong assessment, AM Best said in a press release.
KICO maintains an adequate level of risk-adjusted capitalization, which is heavily influenced by high gross catastrophe leverage that is reduced to a moderate level net of reinsurance for lower return periods but is elevated further on the tail. The company’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), showed modest improvement at year-end 2020 and year-to-date 2021, driven by lower growth in direct premium written but the company’s geographic concentration and net retention levels in severe event scenarios remain a rating concern, AM Best added in the release.
Management has taken a number of strategic initiatives to control its coastal exposures by utilizing catastrophe modeling software to measure and control average annual loss on individual risks, implementation of deductibles and more granular risk scoring metrics, the release said.
KICO did not immediately respond to a request for comment.
Source: AM Best
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