AM Best Downgrades Ratings of Governmental Interinsurance Exchange in Illinois

December 11, 2019

AM Best has downgraded the Financial Strength Rating to B++ (Good) from A- (Excellent) and the Long-Term Issuer Credit Rating to “bbb+” from “a-” of Governmental Interinsurance Exchange (GIE), in Bloomington, Illinois.

The outlook of these Credit Ratings (ratings) remains stable.

GIE is a public entity risk pool formed as a reciprocal insurance company to provide certain property/casualty insurance coverages and related services exclusively to a small select group of participating local public entities.

The ratings reflect GIE’s balance sheet strength, which AM Best categorizes as very strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM).

The rating downgrades reflect a revision in AM Best’s assessment of GIE’s operating performance to marginal from adequate, given the deterioration of underwriting results over the most-recent five-year period. While initiatives have been put in place to limit severity exposures and non-renew select risks, results have not yet benefited from these actions.

GIE’s balance sheet strength reflects the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), high quality investment portfolio and generally favorable reserve development, partially offset by limited surplus growth and lack of financial flexibility.

GIE’s operating performance has trended downward in recent years, largely due to a spike in weather events and auto losses, as well as continued above-average expenses associated with the cost of litigation in defense of claims against policyholders, commissions and overhead, which have resulted in underwriting and operating performance metrics that trail the commercial casualty composite.

GIE maintains a limited scale of operations, writing specialized business for local public entities in two states. AM Best views GIE’s ERM to be appropriate, with a management team that continues to develop and enhance ERM capabilities.

Source: AM Best

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