OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has assigned a Financial Strength Rating of B++ (Good) and a Long-Term Issuer Credit Rating of “bbb” (Good) to Quasar Insurance Company, Inc. (Quasar) (Mount Pleasant, SC). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect Quasar’s balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
Quasar’s overall balance sheet strength assessment is supported by its strong level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), as well as a conservative investment portfolio and adequate reserves and liquidity; however, the assessment is partially offset by no use of reinsurance to protect surplus in the event of natural catastrophes and the high-limit offering relative to the captive’s surplus.
Quasar’s adequate operating performance is primarily based on audited results over the most recent five-year period and the company’s ability to execute its strategic business plan and meet forecast operating results. The captive has reported solid results in recent years, primarily driven by underwriting and investment income, supporting the company’s surplus growth. The captive’s results are forecast to remain adequate over the next five years with projecting overall earnings in all years. Premiums are primarily derived from the general liability, subcontractor default and builders risk lines of business and are expected to remain consistent in the near term, based on company forecasts.
Business profile is assessed as limited as a single-parent captive established to provide liability insurance to its sister affiliate, DSLD Homes, LLC (DSLD), and its other affiliated companies. DSLD is a large, privately held home builder that specializes in residential construction throughout Louisiana, Southern Mississippi, Alabama, Florida and Texas. DSLD is actively constructing homes in the South with approximately 75% of the homes built in Louisiana. The captive offers nine different coverages providing product diversification; however, general liability and subcontractor default consists of approximately 80% of the business. The senior management team is experienced in the construction and home building industries, and the captive is managed by a third-party captive manager in collaboration with the senior management team.
ERM is considered appropriate. Risk management of the captive falls under the scope of the ultimate parent, which has implemented an active risk management approach, enabling all affiliated subsidiaries to appropriately manage their risks in line with the organization's overall strategic direction and risk appetite. Management strategically evaluates top risks and mitigates severity through active risk management. Best practices include stringent construction processes, annual insurance reviews and bi-monthly, in-person senior management meetings to discuss current and emerging issues. The captive does not currently utilize reinsurance partially offsetting the positive factors above.
AM 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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