A.M. Best Assigns Rating to NIAC and Affiliated Companies

A.M. Best Co. assigned an “A-” (Excellent) financial strength rating to Nonprofits’ Insurance Alliance of California (NIAC) and “B++” (Very Good) ratings to Alliance of Nonprofits for Insurance, Risk Retention Group (ANI-RRG), Vermont, and National Alliance of Nonprofits (NANI), Vermont.

All companies are members of the Nonprofits Insurance Alliance Group (NIA Group).

NIAC is a non-profit, tax exempt insurance pool that provides liability coverages to the nonprofit sector in California. NIAC’s captive affiliate, ANI-RRG, provides the same range of liability coverages to non-profit organizations in states other than California. NANI is also an affiliate captive that reinsures NIAC and ANI-RRG. The companies’ relationships are through shared governance, not ownership.

A.M. Best indicated that NIAC’s rating reflects the pool’s sound capitalization, solid operating profitability and conservative loss reserving. The pool also benefits from its strong market position, currently insuring more than 2,740 non-profits in California with a steadily growing book of business. Other positive rating factors include the pool’s tax-exempt status, strong member retention derived from its expanding products and services and proactive loss control programs.

NIAC provides liability insurance coverages tailored to the specialized needs of the nonprofit sector. NIAC also assists member non-profit organizations in developing and implementing effective loss control and risk management programs. Through its prudent underwriting, the pool has been able to provide its insureds with a stable market for reasonably priced liability insurance and build surplus over the years through retained earnings. The rating also reflects NIAC’s recent business expansion through affiliate and non-affiliate insurance entities, which will enable the NIA Group to diversify geographically (through ANI-RRG), offer additional lines of coverage and provide stability through an effective reinsurance program (NANI).

These positive rating factors are partially offset by the potential for volatility in its liability coverages and the pool’s specialty market focus in California, which makes it susceptible to competition risk and changes in regulation. However, the volatility is somewhat mitigated by conservative reserve practices and prudent reinsurance protection on excess layers. Additionally, membership in the pool is increasing, and member retention is very high due to historically stable rates and high quality services.

The ratings on ANI-RRG and NANI reflect the high level of capitalization for their current risk profile and strategic relationship with, and natural complement to, NIAC’s already established business. NANI provides excess coverages for the lines of business written by NIAC and ANI-RRG, with whom it shares its rating. NANI will facilitate the expansion of the group’s insurance products and services outside of California by reinsuring the business of its affiliate, ANI-RRG. ANI-RRG will provide a range of liability coverages to nonprofit organizations in states other than California. Additionally, NANI’s assumption of the historically profitable NIAC business will provide it operating stability as it implements its business plan in 2001.

Management of the Group received grants of $10 million in 2000, of which $8 million was allocated to NANI, and $2 million was allocated to ANI-RRG. NANI and ANI-RRG will also benefit from the financial strength, management experience and franchise value of NIAC, which has a sound balance sheet and a high profile position in the nonprofit arena. Current challenges include the extremely difficult and competitive non-profit market and the establishment of new distribution channels and regulatory relationships.

Topics California Profit Loss Reinsurance AM Best