AM Best Revises Issuer Credit Rating Outlook to Negative for Frank Winston Crum Insurance Company

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has revised the outlook to negative from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term ICR of “bbb+” (Good) of Frank Winston Crum Insurance Company (FWC) (Clearwater, FL). The outlook of the FSR is stable.

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

The revision of the Long-Term ICR outlook to negative from stable reflects AM Best’s concern regarding continued adverse loss reserve development and the potential for further reserve strengthening to pressure FWC’s balance sheet strength fundamentals. The company’s strongest risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), remains supportive of the strong balance sheet strength assessment; however, the assessment is constrained by elevated reserve uncertainty and significant reliance on reinsurance. Recent adverse reserve development has been driven primarily by legacy general liability exposures, including Florida construction-defect business.

Management has taken actions to address reserve volatility, including strengthening reserves, tightening underwriting guidelines and policy terms, exiting certain construction-defect exposures and bringing general liability claims handling in-house. Recent claim trends indicate some moderation in legacy claim emergence; however, these actions require further seasoning before AM Best can conclude that reserve volatility has been sustainably reduced. The strong balance sheet strength assessment also benefits from FWC’s conservative investment portfolio, financial flexibility and demonstrated parental support.

FWC’s adequate operating performance assessment reflects volatility in recent underwriting results, driven in part by adverse reserve development, partially offset by consistent investment income. The limited business profile reflects product and geographic concentration, while the appropriate ERM assessment reflects the company’s developed risk management framework, tempered by its reserving risk management capability.

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