AM Best Revises Outlooks to Negative for Knight Insurance Company Ltd. and Its Affiliates

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings of “a-” (Excellent) of Knight Insurance Company Ltd. (Cayman Islands), KnightBrook Insurance Company, Knight Specialty Insurance Company (both of Wilmington, DE) and Guilderland Reinsurance Company (New York, NY). These companies collectively are referred to as Knight.

The Credit Ratings (ratings) of Knight reflect its balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile, appropriate enterprise risk management and rating enhancement afforded by its non-insurance ultimate parent, the Don R. Hankey Trust (Hankey).

The negative outlooks reflect the group’s significant underwriting losses in 2024, which was driven by high amounts of prior year adverse development, mostly stemming from programs written prior to 2022, which had been put in run-off in the last one-two years. On a five-year (2020 -2024) weighted average basis, underwritings results were also unprofitable, although positive total returns were generated in the last five years, reflecting significant investment market gains. The group executed a second Adverse Development Cover (ADC) in December 2024, on the aforementioned 20 plus run-off programs with Hankey Re, an affiliated segregated portfolio cell company backed by the ultimate owner of Knight, after a first Loss Portfolio Transfer/ADC cover in early 2022. The underwriting losses reflect the difficult commercial auto market conditions in the last years driven by both economic and social inflation and Knight’s seeming inability to contain these losses successfully. Most of the remaining active programs are currently profitable and Knight has also started writing business on a direct basis for better controls, but there is a considerable amount of execution risks associated with this change of strategy.

Knight's ratings also benefit from explicit support from Hankey, which has demonstrated ability, willingness and wherewithal to support Knight. Hankey has made multiple significant capital contributions over the last 10 years. Knight is a strategic subsidiary as its primary insurance operation. For context, Knight comprises less than 5% of assets and equity of the enterprise as a member of the Hankey Group, which is a group of companies operating primarily in the automotive industry, with $25.7 billion in assets in 2024.

Negative rating actions could occur if adverse development trends persist, or if risk-adjusted capitalization meaningfully weakens due to other factors, also if the prospective shifting business mix or strategy, including direct business and program selection, appears to no longer support the current business profile or generate an adequate level of operating performance metrics. Positive rating actions could occur if Knight establishes a track record of prudent underwriting and reserving while maintaining its risk-adjusted capitalization at the strongest level.

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