A.M. Best Places Shelter Re’s Rating Under Review

A.M. Best Co. has placed the financial strength rating of “A-” for Shelter Reinsurance Co., Columbia, Mo., under review with negative implications.

This rating action is based on several factors that have combined to weaken Shelter Re’s capital position below levels commensurate with A.M. Best’s “Excellent” rating status. Losses from the recent World Trade Center attacks, coupled with a downturn in the equity markets, have played a part in weakening the company’s capitalization. Additionally, Shelter Re’s high probable maximum loss exposure has also increased the company’s minimum surplus requirement.

Moreover, the under-review rating status considers the potential of an upward revision in preliminary loss estimates and the possibility of further deterioration of the equity markets. The “negative implications” of the under-review status reflects A.M. Best’s concern over the degree to which corrective action needs to be taken by the company; as well as the role Shelter Re’s parent, Shelter Mutual Insurance Co., will play in restoring its subsidiary’s capital position.

Despite this action, Shelter Re has historically exhibited favorable earnings, strong operating cash flows and a practiced underwriting approach. These positive rating factors are derived from its experienced management team, global geographic spread of risk and strong relationship with its parent. Shelter Re provides the group with a unique diversification strategy that complements its core personal-lines book of business and allows it to operate selectively within the reinsurance marketplace, free from many of the pressures experienced by stand-alone reinsurance companies.

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