A.M. Best Assigns Ratings to Coverys Specialty in New Jersey

May 22, 2015

A.M. Best has assigned a financial strength rating of A (Excellent) and an issuer credit rating of “a” to Coverys Specialty Insurance Company. The outlook assigned to both ratings is stable.

Coverys Specialty Insurance Company is a New Jersey-domiciled excess and surplus lines underwriting company created earlier this year by Coverys, a Boston-based provider of medical professional liability insurance and related services.

A.M. Best said these ratings recognize the implementation of a quota share reinsurance agreement between Coverys Specialty and Medical Professional Mutual Insurance Company (ProMutual), the lead company of Coverys Companies. In addition to providing substantial reinsurance support to Coverys Specialty, ProMutual will provide the company with administrative and managerial services.

A.M. Best said Coverys Specialty also will benefit from ProMutual’s leadership position in the medical professional liability market, its long-term profitable operations and the continued support for its policyholders through strong patient safety and risk management programs. Additionally, despite Coverys Specialty’s status as a start-up, it is insulated from underwriting risks such as adverse loss experience or insufficient rate structure and the stresses these risks could cause on resources due to its quota share arrangement.

Partially offsetting these positive rating factors are the market risks inherent within the medical professional liability insurance sector, including tort reform, price competition and regulatory trends, A.M. Best said.

Coverys Specialty intends to complement Coverys’ expertise in medical professional liability insurance across the U.S. by providing coverage and service to potential policyholders beyond physicians, physician groups and hospitals to regional health care systems, teaching institutions and specialty providers on an excess and surplus lines basis.

Because of the depth of the relationship between the two organizations, changes in the ratings of ProMutual may impact Coverys Specialty’s ratings, A.M. Best also said. Positive rating actions would be driven by underwriting results or loss experience that demonstrates superiority to other medical professional liability insurance providers, as reflected in accident-year loss and LAE (loss adjustment expense) ratios and combined ratios. The ratings could be negatively impacted if capital adequacy declines materially due to higher reserve requirements resulting from weakening loss experience also reflected in prospective loss and LAE ratio and combined ratio deterioration trends.

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