AM Best Issues Improved Outlooks for Barnstable Group in Massachusetts

AM Best has revised its outlooks to stable from negative and affirmed its Financial Strength Rating of A (Excellent) and Long-Term Issuer Credit Ratings of “a” (Excellent) for the members of Barnstable Group, which includes Barnstable County Mutual Insurance Co. and its wholly owned subsidiary, Barnstable County Insurance Co. Both companies are domiciled in Yarmouth Port, Massachusetts.

AM Best said the stable outlooks reflect an improvement in Barnstable’s underwriting performance in recent years that has resulted in five-year underwriting and operating performance metrics outperforming the personal property composite average. “While underwriting results have been, at times, impacted by weather-related volatility, Barnstable continues to produce strong overall underwriting and operating performance that have resulted in further growth in surplus,” AM Best stated.

The rating agency further noted that while the five-year loss ratio “remains materially better” than the composite average, this is partially offset by the company’s “elevated expense position,” which together yields a combined ratio average that outperforms the composite average. Other key performance indicators including five-year return on revenue and operating ratio, are also “substantially better than the composite average.”

AM Best said the credit ratings reflect Barnstable’s balance sheet strength, which it assesses as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management (ERM).

The group’s very strong balance sheet strength is supported by risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio, favorable loss reserve development, and underwriting leverage that is “considerably below the composite average,” AM Best reported.

The limited business profile reflects the group’s focus as a niche homeowner writer specifically in Cape Cod, Massachusetts, and its surrounding coastal counties.

AM Best said it considers the group’s ERM practice as appropriate, as management “diligently reviews various catastrophe models and maintains a comprehensive reinsurance program to ensure it appropriately mitigates the risk given its narrow geographic footprint.”

In its 2022 annual report, Barnstable noted the rising cost of catastrophe reinsurance as a challenge and that it may have to “recalibrate” by reducing the number of homes it insures and raising its prices. “In the year ahead, we will take the necessary measures to preserve The Barnstable’s financial strength through this challenging macroeconomic environment,” the coastal insurer wrote.

For 2022, the mutual insurer reported that underwriting results contributed favorably to surplus growth, with a 10-percent return on net revenue, which partly offset investment losses.

Topics Trends Massachusetts AM Best