OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has assigned a financial strength rating (FSR) of A- (Excellent) and an issuer credit rating (ICR) of “a-” to MedChoice Risk Retention Group, Inc. (MedChoice RRG) (Milton, VT). The outlook assigned to each rating is stable. In addition, A.M. Best has affirmed the FSR of A- (Excellent) and the ICR of “a-” of Physicians Insurance A Mutual Company (PI) (Seattle, WA). The outlook for each of these ratings is stable. The two companies comprise Physicians Insurance Mutual Group.
The rating affirmations of Physicians Insurance Mutual Group are based on its strong risk-adjusted capitalization and profitable operating performance. The ratings also recognize the group’s expertise in writing medical professional liability (MPL) insurance for health care providers and hospital professional liability insurance in multiple states, as well as its market leadership position in Washington. Partially offsetting these positive rating factors is the group’s predominantly monoline concentration in underwriting MPL lines, primarily in Washington and Oregon. Furthermore, competition in the MPL sector is strong, pricing is soft and significant changes in health care delivery present challenges to achieving underwriting profitability. To counter these headwinds, the group provides medical stop-loss and provider excess lines of business, along with reinsurance, while also generating more non-risk income from its subsidiaries.
The ratings assigned to MedChoice RRG take into consideration the challenges associated with it being a startup insurer offset by its strong alliance with PI, including board membership and the material explicit support provided by PI through a 95% intercompany quota share reinsurance agreement, the maximum allowed by Vermont regulators. The ratings also consider the strategic role MedChoice RRG plays as an affiliate of PI and the synergies provided by PI via captive management services through the PI family of companies. Key functions provided to MedChoice RRG by these companies include risk management consulting, continuing medical education and claims administration services.
Positive rating action for the group could result following a sustained favorable earnings trend. In addition, positive rating action also could result from continued capital strengthening. Negative rating action could occur following an unfavorable earnings trend, or if there is a material reduction in risk-adjusted capitalization.
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.
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