OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Vault Reciprocal Exchange (Vault) (St. Petersburg, FL). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Vault’s balance sheet strength, which AM Best categorizes as strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM). Vault is sponsored by Allied World Assurance Company Holdings Ltd (Allied World), which is a member of Fairfax Financial Holdings Limited. Allied World provides substantial capital, strategic, operational and reinsurance support, which has been considered in the ratings.
Vault was created in 2017 to take advantage of market opportunities within the high net worth homeowners segment, specifically starting in Florida but has since expanded into several other states including South Carolina and New Jersey. The company’s balance sheet strength assessment is based on the strongest level of risk-adjusted capitalization, as measured by Best Capital Adequacy Ratio (BCAR), which is intended to support growth plans over the near term, partially offset by a capital structure that leverages surplus notes significantly. Operating performance captures execution risk whereby profit is linked to the generation of member surplus contributions that are tied to meeting gross written premium projections. The limited profile reflects the current geographic and product concentration within catastrophe-prone Florida, though Vault’s call for expansion into other states. AM Best considers ERM to be appropriate, reflective of sophisticated catastrophe modeling techniques, a prudent reinsurance program and the ability to draw from a well-established ERM program within Allied World. The stable outlooks are based on AM Best’s expectation that Vault’s operating results will generally fall in line with management’s projections, and balance sheet strength will remain strong and supportive of future growth supplemented with ongoing financial commitments from Allied World.
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