AM Best downgrades Bankers Insurance Group members’ credit ratings

ALDUICK, NJ-(BUSINESS WIRE)–AM Best downgraded the financial strength rating to B+ (Good) from B++ (Good) and the long-term issuer credit ratings to ‘bbb-‘ (Good) from ‘bbb’ (Good) of members of Bankers Insurance Group (The Bankers). Group members are Bankers Insurance Company (St. Petersburg, FL) and its property/casualty subsidiaries, Bankers Specialty Insurance Company (Metairie, LA) and First Community Insurance Company (St. Petersburg, FL). The outlook for these credit ratings (ratings) is negative.

The ratings reflect the strength of Bankers’ balance sheet, which AM Best rates as strong, as well as its weak operating results, limited business profile and appropriate enterprise risk management (ERM).

Bankers’ downgrade reflects the continued deterioration of the surplus and ongoing challenges in reserve development. Bankers have reported a drop in surplus in four of the past five years due to increased underwriting losses. This trend continued with a further decline in the surplus in the first half of 2022. Reserves, which continue to develop unfavorably, have been affected in recent years by widespread inflationary pressures in the homeowner business. Drain lines, which were previously a cause of unfavorable development, have started to develop favorably due to years of strengthening stocks and reducing exposures given their drain condition.

The negative outlook is based on the aforementioned issues that raise concern about the efficacy of Bankers’ ERM program against current and emerging risks. Bankers provide personal property coverage in Florida, Louisiana and South Carolina, all of which expose the group to severe weather events associated with coastal states. Social inflationary pressures, particularly in Florida, and significantly rising reinsurance costs challenged the group’s performance. Management responded by implementing a number of corrective actions, including the non-renewal of problem risks and the strategic exit of personal lines in Florida, Louisiana and South Carolina. An exit from these segments could stabilize results, as the homeowner line has been driving much of the volatility seen over the past five years due to the increasing frequency and strength of storms. Looking ahead, Bankers seeks to focus on commercial risks and guarantees (ie surety bonds) as both have delivered adequate results for the group in the past. While these initiatives may favorably impact the risk profile and stabilize results, the ultimate effectiveness of these efforts and their impact on capital and operating results remain uncertain.

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AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information visit www.ambest.com.

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