Best’s News & Research Service - February 16, 2018 04:27 PM (EST)
A.M. Best Affirms Credit Ratings of Members of Castle Key Group
- February 16, 2018 04:27 PM (EST)
Oldwick //BestWire// - A.M. Best has affirmed the Financial Strength Rating (FSR) of B- (Fair) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bb-” of the members of Castle Key Group (Castle Key) (headquartered in St. Petersburg, FL). The outlook of these Credit Ratings (ratings) remains stable. (See below for a detailed listing of the companies.)
The ratings reflect Castle Key’s balance sheet strength, which A.M. Best categorizes as weak, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
Castle Key’s balance sheet assessment is weak when incorporating the catastrophe stress-tested view, as the group’s geographic business concentration results in a susceptibility to catastrophic loss accumulation. As a dedicated Florida property writer for its parent company, Allstate Insurance Company (Allstate), Castle Key maintains significant exposure to hurricanes, with a corresponding substantial reliance on catastrophe reinsurance.
These negative rating factors are partially offset by Castle Key’s improved operating performance and surplus accumulation over the last several years, which had been positively impacted by favorable loss activity due to increased rates and the absence of hurricane events prior to the third quarter of 2016. Operating results in 2016 were adversely impacted by hurricanes Hermine and Matthew, however those related losses were manageable, without material impact on Castle Key’s risk-adjusted capital position. In 2017, operating results were again impacted as Hurricane Irma caused substantial damage in Florida. Given Castle Key’s reinsurance program and its market share in Florida, losses from Hurricane Irma did not have a material impact on the group’s risk-adjusted capital position.
The ratings also benefit from the historical financial and operational support provided to Castle Key as part of the Allstate organization. Castle Key is separately capitalized and not reinsured by Allstate, but it is A.M. Best’s expectation that Allstate would provide sufficient support to maintain Castle Key’s risk-adjusted capital at a level commensurate with its rating level in the event of frequent or severe hurricane activity.
The FSR of B- (Fair) and the Long-Term 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
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
A.M. Best is the world’s oldest and most authoritative insurance rating and information source.