OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has downgraded the Financial Strength Rating to B (Fair) from B+ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “bb” (Fair) from “bbb-” (Good) of Kingstone Insurance Company (KICO) (Kingston, NY). Concurrently, AM Best has downgraded the Long-Term ICR to “b-” (Marginal) from “bb-” (Fair) and its associated securities for Kingstone Companies, Inc. (KINS) (Delaware), the insurance holding company of KICO. The outlook of these Credit Ratings (ratings) was revised to negative from stable. Concurrently, AM Best has withdrawn all of the public ratings of KINS. See below for a detailed listing of KINS’ Long-Term Issue Credit Ratings (Long-Term IR) and Indicative Credit Ratings that were also withdrawn.
The ratings of KICO reflect its balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and marginal enterprise risk management (ERM).
The ratings downgrade is driven by significant deterioration in KICO’s risk-adjusted capitalization that occurred across all return periods due to a sizeable increase in the net probable maximum loss (PML); this was a result of its latest reinsurance renewal, and a decline in surplus from weather-related losses and dividend payments in 2022. The sizeable differential in PMLs was driven by the dislocation in the catastrophe reinsurance markets in June, leading to management’s inability to secure the same limit as the prior year and purchasing substantially less catastrophe reinsurance as a result. This impact has resulted in AM Best revising KICO’s ERM assessment to marginal from appropriate. The net probable maximum loss for a 1-in-100 year loss return period accounts for a significant percentage of the company’s surplus as of Q1/2022. Therefore, the company’s risk appetite, tolerances, and the composition of its latest reinsurance structure are not commensurate with an ERM assessment of appropriate. The outlook change of these credit ratings to negative primarily reflects the deteriorating underwriting results for year-end 2021 and the first quarter of 2022 that were driven mainly by weather-related losses.
AM Best considers KICO’s exposure to environmental, social and governance issues to be material due to its coastal concentration and associated climate risk with changing weather patterns. In addition, KICO’s net PML for the 100 year return period remains elevated, placing potential pressure on surplus.
The following Long-Term IR has been downgraded with the outlook revised to negative from stable, and the public rating subsequently withdrawn, for Kingstone Companies, Inc.:
-- to “ccc+” (Weak) from “bb-” (Fair) on $30.0 million 5.5% senior unsecured notes, due 2022
The following indicative Long-Term IRs have been downgraded with the outlook revised to negative from stable, and the public rating subsequently withdrawn, for Kingstone Companies, Inc.:
-- to “ccc+” (Weak) from “bb-” (Fair) on senior unsecured notes
-- to “ccc” (Weak) from “b+” (Marginal) on subordinated notes
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