A.M. Best Co. downgraded the financial strength rating of TIG Insurance Group, Irving, Texas, from “A-” (Excellent) to “B++” (Very Good), affirmed the “A-” (Excellent) rating of Crum and Forster Insurance Group (C&F), Morristown, N.J., and removed both ratings from under review.
Concurrently, A.M. Best affirmed the financial strength ratings of other insurance subsidiaries of Toronto-based Fairfax Financial Holdings. Additionally, the “bbb-” senior debt rating relating to Fairfax, the “bb+” senior debt and “bb” trust preferred ratings relating to TIG Holdings were affirmed.
In early November, Fairfax announced a third quarter loss of C$458 million, which included a substantial charge relating to reserve strengthening at its two largest U.S. insurance subsidiaries, C&F and TIG. On Nov. 6, A.M. Best placed these companies’ ratings under review with developing implications.
A.M Best recently completed a review of Fairfax and its subsidiaries that focused on the adequacy of current carried reserves at C&F and TIG, capitalization, prospective earnings capabilities for the consolidated group and the financial flexibility at the holding company. TIG’s downgrade reflects A.M. Best’s belief that despite significant remedial actions already taken by the current management, TIG’s turnaround will be protracted due to its operating platform, which limits flexibility in pricing and underwriting control.
TIG maintains a significant concentration of business with a limited number of managing general agents. In addition, the company’s historical dependence on third party administrators heightens the uncertainty with respect to the adequacy of its reserve position. However, the current rating reflects TIG’s adequate level of capitalization even with consideration to the significance of affiliated invested assets. The company is expected to benefit from improving market conditions within the commercial insurance sector.
A.M. Best affirmed C&F in the belief that the current management’s underwriting and reserving actions will significantly improve C&F’s operating performance in 2002. This improvement has already begun to emerge in both accident and policy year underwriting trends. This, combined with C&F’s strengthened reserves, solid capitalization and significant reinsurance protection relating to prior accident years, positions the company to take advantage of the favorable turn in the commercial insurance sector.
Topics AM Best
Was this article valuable?
Here are more articles you may enjoy.
Cracks in O’Hare Columns Aren’t Insured Property Damage, Just Bad Product – Court 
Pfizer Agrees to Settle More Than 10,000 Zantac Cancer Lawsuits 
Worsening Weather Igniting $25 Billion Weather Derivatives Market 
Everton FC Buyer Accused of Fraud, Double-Pledging Assets in Lawsuit From This Issue
