AmTrust is beginning to scare me. A ton of business written through MGAs. Then many MGA contracts cancelled – which could be a plus. Then injections of capital which [although it is not said] could do to bolster the policholders surplus. Something isn’t being said but the signs are there. Is it possible that we could have another Mission here? Another “A” rated company that disappears overnight with no warning?
there is plenty of warning here: missed annual statement filings, SEC/FBI investigations, cancelled business (especially on Public Entity), bolstering of earnings, selling liquid assets, trying to sell fee business, etc.
there are brokers in the marketplace trying to limit E&O exposure by getting their customers to sign confirmations that they know of AmTrust’s issues and will grant them the ability to find a new home for the coverage if the rating drops to a B.
Excellent points very well stated. I wonder how many current underwriters and brokers have a clue about the Mission and how to read between the lines of insurer convention statements.
As to your second point, Surplus lines brokers should prepare their “chicken” letters just in case. The bbb rating of the AmTrust bonds and the overall Best’s Negative Outlook [2-17] shows how shaky this situation is.
If 50 years in this business have taught me anything its that an insurer who has a stock offering to raise funds to boost their policyholders surplus has a huge underreserving problem which usually results in a drop in their Best’s rating. When an A carrier drops to B their usefulness as a market decreases and their writings suffer. Policyholders surplus suffers when writings diminish. The anticipation of that series of events is usually why insurers resort to public stock offerings and/or huge contributions of capital to keep their policyholders surplus growing…..and the policyholders surplus has to grow because of pressure from insurance departments to reserve more adequately.There’s a vicious circle beginning here.
“Where there’s smoke, there’s fire” – well, I don’t always believe that, but, in this case, there is SO MUCH smoke that something is almost certainly going on. Now Amtrust has sold its personal lines processing system for $200Mn to………………National General, an affiliated company. It sold the system TO ITSELF for $200Mn. This is smoke and mirrors, a farce, etc. It’s like watching a trainwreck in slow motion. Where are the regulators?
AmTrust is beginning to scare me. A ton of business written through MGAs. Then many MGA contracts cancelled – which could be a plus. Then injections of capital which [although it is not said] could do to bolster the policholders surplus. Something isn’t being said but the signs are there. Is it possible that we could have another Mission here? Another “A” rated company that disappears overnight with no warning?
there is plenty of warning here: missed annual statement filings, SEC/FBI investigations, cancelled business (especially on Public Entity), bolstering of earnings, selling liquid assets, trying to sell fee business, etc.
there are brokers in the marketplace trying to limit E&O exposure by getting their customers to sign confirmations that they know of AmTrust’s issues and will grant them the ability to find a new home for the coverage if the rating drops to a B.
Excellent points very well stated. I wonder how many current underwriters and brokers have a clue about the Mission and how to read between the lines of insurer convention statements.
As to your second point, Surplus lines brokers should prepare their “chicken” letters just in case. The bbb rating of the AmTrust bonds and the overall Best’s Negative Outlook [2-17] shows how shaky this situation is.
If 50 years in this business have taught me anything its that an insurer who has a stock offering to raise funds to boost their policyholders surplus has a huge underreserving problem which usually results in a drop in their Best’s rating. When an A carrier drops to B their usefulness as a market decreases and their writings suffer. Policyholders surplus suffers when writings diminish. The anticipation of that series of events is usually why insurers resort to public stock offerings and/or huge contributions of capital to keep their policyholders surplus growing…..and the policyholders surplus has to grow because of pressure from insurance departments to reserve more adequately.There’s a vicious circle beginning here.
Not sure I trust AM Best anymore. They were giving AIG A ratings in the midst of their sub prime meltdown requiring the bailout.
“Where there’s smoke, there’s fire” – well, I don’t always believe that, but, in this case, there is SO MUCH smoke that something is almost certainly going on. Now Amtrust has sold its personal lines processing system for $200Mn to………………National General, an affiliated company. It sold the system TO ITSELF for $200Mn. This is smoke and mirrors, a farce, etc. It’s like watching a trainwreck in slow motion. Where are the regulators?