AM Best


A.M. Best Downgrades Ratings of KnightBrook Insurance Company and Removes Ratings from Under Review with Negative Implications


CONTACTS:


Alexander Sarfo
Senior Financial Analyst
(908) 439-2200, ext. 5779
alexander.sarfo@ambest.com

Steven Chirico, CPA
Assistant Vice President
(908) 439-2200, ext. 5087
steven.chirico@ambest.com


Christopher Sharkey
Manager, Public Relations
(908) 439-2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

OLDWICK - NOVEMBER 20, 2014 10:29 AM (EST)
A.M. Best has downgraded the financial strength rating to B++ (Good) from A- (Excellent) and the issuer credit rating to bbb+ from "a-" of KnightBrook Insurance Company (KBIC) (headquartered in Valley View, PA). Additionally, A.M. Best has removed the ratings from under review with negative implications. The outlook assigned to both ratings is stable.

The ratings were placed under review with negative implications in July 2014 following concerns of KBIC's heightened execution risk due to significant business growth in 2013, and the uncertainty regarding loss-reserve and premium adequacy from this new business. These concerns were amplified by sizable adverse loss development experienced in the first quarter of 2014.

The rating downgrades reflect KBIC's variability in operating results due to continuing unfavorable underwriting and operating performance through Sept. 30, 2014. Also of concern are KBIC's above-average growth and the uncertainty regarding the execution of its business plan in a competitive environment and potential integration risks of future operations, all of which could result in continued pressure on its underwriting margins. KBIC's volatile underwriting performance has been due to a diet of frequent reserve strengthening in recent years. As a result, KBIC has reported significant underwriting losses in the past five years, which have continued into 2014.

The ratings reflect KBIC's adequate current and prospective balance sheet strength and the demonstrated and readily available substantial financial and operational support provided by its parent, KnightBrook LLC, in the form of capital contributions. KBIC has a talented management team with its own resources, access to its parent's capital and a strong business profile, as well as the ability to write multiple lines of business in various geographies in the United States.

Factors that could lead to positive rating actions for KBIC are evidence of favorable sustainable operating performance and credit metrics that improve, steadily supporting its ratings.

Negative rating pressure may occur if KBIC has a continuation of underwriting losses and adverse operating results leading to a material decline in its risk-adjusted capital as well as an altered view of KBIC management's capability.

A.M. Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated in the United States and throughout the world. For current Best's Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.

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.

Key insurance criteria reports utilized:


  • Catastrophe Analysis in A.M. Best Ratings

  • Rating Members of Insurance Groups

  • Risk Management and the Rating Process for Insurance Companies

  • Understanding BCAR for Property/Casualty Insurers


A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.


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AMB# Company Name
003140 KnightBrook Insurance Company
052556 KnightBrook LLC