A.M. Best Revises Outlooks to Positive for Capacity Insurance Company

OLDWICK, N.J.--()--A.M. Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” of Capacity Insurance Company (Capacity) (Sunrise, FL).

The revised outlooks to positive reflect Capacity’s improved risk-adjusted capitalization and operating performance in recent years, as Capacity ramped up its business writings, and its thus far successful execution of the operational and financial plans by the management team, with focus on writing commercial property business in Florida.

The Credit Ratings (ratings) reflect Capacity’s strong risk-adjusted capitalization, driven by moderate net underwriting leverage and low investment leverage, as well as its improved operating performance in recent years. Partially offsetting these rating factors are Capacity’s below-average five-year operating returns, geographic concentration of business, elevated expense structure and significant dependence on reinsurance.

Since Capacity’s operations currently are limited to Florida, where, in the past, severe losses from hurricanes impacted its overall profitability, underwriting efforts are focused on managing its natural catastrophe probable maximum loss. Although catastrophe risk is mitigated by a comprehensive reinsurance program, it creates a significant dependence on reinsurance for surplus protection.

Capacity’s pure loss ratios compare favorably with its peers; however, it maintains an elevated expense structure. This is reflective of high reinsurance costs and management fees paid to its managing general agent, which creates an expense disadvantage for the company.

Positive rating action is contingent upon Capacity’s ability to report consistent and sustainable operating results, while maintaining risk-adjusted capitalization. Negative rating action could occur from material decline in risk-adjusted capitalization, sustained deterioration in operating results or financial leverage at the holding company becoming excessive.

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. For more information, visit www.ambest.com.

Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.

Contacts

A.M. Best
Kenneth Tappen, +1-908-439-2200, ext. 5248
Senior Financial Analyst
kenneth.tappen@ambest.com
or
Richard Attanasio, +1-908-439-2200, ext. 5432
Senior Director
richard.attanasio@ambest.com
or
Christopher Sharkey, +1-908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, +1-908-439-2200, ext. 5644
Director, Public Relations
james.peavy@ambest.com

Contacts

A.M. Best
Kenneth Tappen, +1-908-439-2200, ext. 5248
Senior Financial Analyst
kenneth.tappen@ambest.com
or
Richard Attanasio, +1-908-439-2200, ext. 5432
Senior Director
richard.attanasio@ambest.com
or
Christopher Sharkey, +1-908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, +1-908-439-2200, ext. 5644
Director, Public Relations
james.peavy@ambest.com