OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has assigned a financial strength rating of A (Excellent) and an issuer credit rating of “a” to FD Insurance Company (FD) (Jacksonville, FL). The outlook assigned to both ratings is negative.
These ratings recognize the implementation of a 100% quota share reinsurance agreement and loss portfolio transfer agreement between FD and NORCAL Mutual Insurance Company (NORCAL Mutual) (San Francisco, CA), the lead company of the NORCAL Group (NORCAL). FD was acquired by NORCAL Mutual on Dec. 31, 2015, which immediately implemented the reinsurance agreement. Other members in the group include NORCAL Mutual’s wholly owned subsidiaries, PMSLIC Insurance Company and Medicus Insurance Company. The outlook on the ratings is negative due to the group’s trend of deteriorating operating performance.
FD is a mono-line carrier underwriting medical professional liability (MPL) coverage for approximately 2,200 physicians and surgeons in Florida and Georgia through independent agents in Florida since its founding in November 2005. NORCAL acquired FD to add Florida as another principal market where NORCAL had minimal market presence prior to the acquisition.
FD will benefit as a subsidiary of NORCAL from NORCAL’s strong balance sheet, proactive risk management and marketing initiatives to preserve leadership positions in its principal markets. In addition to providing substantial reinsurance support to FD, NORCAL will provide the company with enterprise risk management direction and administrative and managerial support.
Partially offsetting these positive rating factors are NORCAL’s weakening operating performance; slowing, though still favorable, reserve development; concentration in the MPL line of business with exposure to tail coverage; and high dependence on investment income for profitability. Additionally, FD is exposed to the market risks inherent within the MPL sector, including potential changes to tort reform; soft market pricing and strong competition; changes in the regulatory or legislative environments; and changes in health care delivery and MPL market dynamics.
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