AM Best Upgrades Credit Ratings for BlueShore Insurance Company

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has upgraded the Financial Strength Rating to A (Excellent) from A- (Excellent) and the Long-Term Issuer Credit Rating to “a” (Excellent) from “a-” (Excellent) of BlueShore Insurance Company (BlueShore) (Dallas, TX). The outlook of these Credit Ratings (ratings) has been revised to stable from positive.

The ratings reflect BlueShore’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management (ERM).

The ratings upgrades reflect BlueShore’s sustained improvement in underwriting performance and total profitability relative to peers in the auto warranty segment. The improvement in results can be directly attributed to management’s decision to transition the company to becoming primarily a writer of default-based contractual liability insurance policies (CLIP) from that of a first-dollar writer. After implementing this change to its policies, the company’s loss ratio declined to a single digit-average over the five-year period ending in 2023. Ultimately, the default policies carry minimal risk to BlueShore, as the company is obligated to pay claims only if its affiliated obligors default or fail to perform on its contractual obligations related to its auto warranty product offerings. Currently, most policies are written on a default-basis, except in limited jurisdictions where a first-dollar CLIP is required. Prospectively, management’s projections are in line with the current level of profitability, and management is not anticipating making any changes to BlueShore’s underwriting approach or adding any significant product offerings.

BlueShore’s balance sheet is supported by risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), as well as a diversified investment portfolio and the explicit support it receives from its parent company, Verde Capital Partners. BlueShore’s balance sheet also benefits from the funds-held amounts that it receives related to the default-based policies it provides to its affiliates, which acts as a form of collateral and further protects the insurer’s capital base. The company’s limited business profile reflects its significant product concentration and narrow market position. AM Best considers the company’s ERM program to be appropriate for the size and scope of its operation.

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