AM Best Affirms Credit Ratings of Paramount Insurance, Inc.

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of Paramount Insurance, Inc. (Paramount) (Honolulu, HI). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Paramount’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.

The analysis is conducted based on the weakest-link approach with Paramount, the core, along with Kona Global and Cardinal Assurance, the cells, which incorporates qualitative and quantitative metrics for each entity within the cell company. The very strong balance sheet strength assessment is supported by the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), at the risk-taking core, Paramount, along with each cell, Kona Global and Cardinal Assurance. The organization historically has exhibited solid surplus growth over the last 10-year period, despite sizable dividends to the intermediate parent, Webcor L.P. Financial flexibility is afforded through the intermediate parent, and if warranted, the ultimate parent, Obayashi Corporation (Obayashi) [OTCMKT: OBYCF], which wholly owns each entity.

Historically, operating performance exhibited strong underwriting metrics with elevated results in each of the last two periods driven by lower premium volumes. Business profile is considered limited as each entity provides similar coverage within the immediate parent’s commercial construction activities. Enterprise risk management appears to be appropriate for the size and scope of the organization.

Implicit, and if needed, explicit support, is provided from Obayashi to Paramount and the entities within its structure. The structure is fully embedded within each respective immediate parent’s noninsurance operations.

The stable outlooks reflect the expectation that Paramount and each cell within its structure will maintain a balance sheet strength assessment of very strong, which is supported by the strongest level of risk-adjusted capitalization, along with prudent reserving and capital management philosophies. In turn, the outlooks also assume that the level of implicit and explicit support by Obayashi will be provided to each entity within the structure equally, if needed. Although Kona Global is currently inactive, AM Best expects that it will be capitalized to support its five-year business plan at the strongest risk-adjusted capitalization level prior to it writing business. Should Kona Global’s risk-adjusted capitalization fall below AM Best’s expectations, or if there is a perceived view that the ultimate parent’s ability or willingness to support its cells (including Kona Global and Cardinal Assurance) is diminished, negative rating action could result.

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.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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