View this article online: https://www.insurancejournal.com/news/national/2013/04/22/289265.htm
A.M. Best Co. has removed from under review with negative implications and affirmed the financial strength rating of ‘A’- (Excellent) and issuer credit rating of “a-” of Delaware-based Canopius US Insurance, Inc. (formerly Omega US Insurance, Inc.). The outlook assigned to both ratings, however, is negative.
Canopius US is a wholly owned subsidiary of the Guernsey-based Canopius Group Limited, following Canopius’ August 2012 acquisition of Omega Insurance Holdings Limited, the former ultimate parent of Canopius US. Canopius is a privately-owned, insurance/reinsurance organization that was formed in 2003.
Best said its rating actions take into consideration the acquisition by Canopius, its “discussions with Canopius’ management regarding the immediate and long-range benefits gained under the new ownership and Canopius’ past success as it relates to mergers and acquisitions.
“These actions also consider Canopius US’ recent favorable attritional loss experience, solid level of risk-adjusted capitalization as well as the explicit and implicit support provided by Canopius as evidenced by the recent capital contribution in the fourth quarter of 2012, the internal quota share reinsurance agreement to be put in place effective January 1, 2013, and Canopius’ expressed consent to maintain capital and surplus at a prescribed level. Canopius US also should benefit from additional actuarial and catastrophe modeling support and efficiencies to be gained from lower overhead expense costs going forward.”
As offsetting factors Best cited the “inherent challenges associated with Canopius US being a predominant binding facility writer, its sub-par earnings performance in 2012 due to Superstorm Sandy and other catastrophe-related losses and its history of heavy overhead expenses under previous ownership, which impeded earnings through its earlier years of operations. Canopius is expected to bring greater efficiencies going forward and has already undertaken a number of steps to reduce Canopius US’ expenses while targeting its first recorded profitable year in 2013.”
Best explained that the “negative outlook recognizes the inherent risk of actual execution by management to deliver on its stated objectives to improve Canopius US’ operating earnings prospects while maintaining a strong level of risk-adjusted capitalization.
“Positive rating actions are unlikely in the near term. Factors that may lead to future negative rating actions include a decline in Canopius US’ risk-adjusted capitalization, continuation of its weak operating performance or deterioration in its reserves. Furthermore, any perceived lessening of support provided by Canopius also would influence the company’s ratings.
Source: A.M. Best