AM Best Revises Outlooks to Stable for Kentucky Employers’ Mutual Insurance Authority

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has revised the outlooks to stable from negative and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Kentucky Employers’ Mutual Insurance Authority (KEMI) (Lexington, KY).

The Credit Ratings (ratings) reflect KEMI’s balance sheet strength, which AM categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

The outlook revisions to stable from negative reflect the company’s improved capital adequacy, as measured by Best’s Capital Adequacy Ratio (BCAR), categorized as strongest in recent periods. KEMI’s improvement in its BCAR can be attributed directly to growth in the company’s policyholder surplus, which has increased every year since 2016. Growth in surplus has been driven by improved operating results, which is demonstrated by the company reporting net income in each of the last four years. Furthermore, the company continues to undertake actions to stabilize reserve volatility on occupational disease exposures, by entering into an adverse development cover (ADC) reinsurance agreement for accident years 2015-2019 to further protect capital. The ADC mitigates the risk of federal black lung claims, which may be brought under the Federal Coal Mine Health and Safety Act (FCMHSA). In its position as a writer of last resort in Kentucky, the company is exposed to occupational disease claims generally stemming from coal mining operations. Additionally, FCMHSA claims are sporadic as they tend to be closely correlated to mine closures. AM Best will continue to monitor KEMI’s loss reserves practices and other balance sheet factors as these exposures continue to evolve.

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