Another example of the difficulty someone like AM Best has in properly evaluating a carrier’s risk load. Accurate wildfire models don’t seem to exist. The fact Merced had as much exposure as they did in Paradise somehow did not show up in the models. If the ratings were reliable, it should not be possible to go from A- to liquidation from one event.
Agree with CL PM. The LA Times article indicated that Merced had $23 mil in policyholder assets prior to receiving any wildfire claims. If that figure is correct, then their AM Best class would have been VI ($25 mil to $50 mil), which is just short of VII ($50 mil to $100 mil, the class usually needed to maintain an agent’s Errors & Omissions). AM Best’s website, as of now, does not indicate what Class Merced was assigned at the time of the loss. With a $64 mil loss, and counting, even Class VII status would not guarantee solvency in this case.
The LAT article also indicated that Merced, through reinsurance, was only responsible for the first $150k of any claim. However just 153 claims would be necessary to absorb all policyholder assets.
I also agree with CL PM. I read this last night on my local news app. I couldn’t help but think about how they became over saturated in Paradise and nobody was paying attention to this- not the company or the DOI. What a shame.
I’ve been in the E&S industry for 15 years and I have read the “Insurance Guarantee Association” verbiage a million times. Never once have I seen this actually come to light with any of the carriers that I have dealt with (thank goodness). It’s just sad all the way around.
I wish the former CEO of Merced good luck in his new endeavors because I am certain that where ever he lands, it won’t be at the reigns of another insurance company. At least I hope not!
They were AM Best rated “A-” and this week were changed to an “F”
Another example of the difficulty someone like AM Best has in properly evaluating a carrier’s risk load. Accurate wildfire models don’t seem to exist. The fact Merced had as much exposure as they did in Paradise somehow did not show up in the models. If the ratings were reliable, it should not be possible to go from A- to liquidation from one event.
I ceased believing Best Ratings when they gave AIG A ratings as they were being bailed out.
Agree with CL PM. The LA Times article indicated that Merced had $23 mil in policyholder assets prior to receiving any wildfire claims. If that figure is correct, then their AM Best class would have been VI ($25 mil to $50 mil), which is just short of VII ($50 mil to $100 mil, the class usually needed to maintain an agent’s Errors & Omissions). AM Best’s website, as of now, does not indicate what Class Merced was assigned at the time of the loss. With a $64 mil loss, and counting, even Class VII status would not guarantee solvency in this case.
The LAT article also indicated that Merced, through reinsurance, was only responsible for the first $150k of any claim. However just 153 claims would be necessary to absorb all policyholder assets.
I also agree with CL PM. I read this last night on my local news app. I couldn’t help but think about how they became over saturated in Paradise and nobody was paying attention to this- not the company or the DOI. What a shame.
I’ve been in the E&S industry for 15 years and I have read the “Insurance Guarantee Association” verbiage a million times. Never once have I seen this actually come to light with any of the carriers that I have dealt with (thank goodness). It’s just sad all the way around.
I wish the former CEO of Merced good luck in his new endeavors because I am certain that where ever he lands, it won’t be at the reigns of another insurance company. At least I hope not!