Press Release|Insurance

KBRA Affirms Ratings of Obsidian Insurance Holdings and Insurance Subsidiaries

25 Jul 2023   |   New York

Contacts

KBRA affirms the BBB- issuer rating of Obsidian Insurance Holdings, Inc. (OIH) and the BBB- senior unsecured debt rating on OIH’s debt due 2025. Additionally, KBRA affirms the A- insurance financial strength (IFSR) ratings on OIH’s subsidiaries Obsidian Specialty Insurance Company (OSIC), Obsidian Insurance Company (OIC), and Obsidian Pacific Insurance Company (OPIC). The Outlook for all ratings is Stable.

OIH is a US-based holding company that – through its U.S. insurance carrier subsidiaries – facilitates and supports specialty insurance programs underwritten by Managing General Agents, Managing General Underwriters, and program managers. It has two admitted carriers (OIC and OPIC) and one surplus lines carrier (OSIC). Each program is supported by an individualized panel of reinsurers, and Obsidian will consider retaining up to 10% of certain programs. It was formed in 2020 in partnership with Genstar Capital.

Key Credit Considerations

Obsidian’s ratings reflect an experienced management team with extensive relationships across the industry, an attractive market opportunity in a fee-based business, a conservative investment portfolio, and an expectation that over time it will maintain sound capitalization and operating and financial metrics, and that risk management will continue to mature. Obsidian is owned by Genstar Capital, a financial sponsor with significant experience in the insurance and insurance-related space that provides capital as well as consultative advice and industry relationships.

Offsetting these credit strengths are the execution risk inherent in any start-up operation, key executive risk, untested risk management, and extensive reliance on reinsurance, which generates counterparty credit exposure and the challenge of consistently securing appropriate and cost-effective reinsurance.

Rating Sensitivities

Factors that could positively impact the ratings include sustained growth in earnings and capital, prudent management of premium leverage and risk exposures, demonstrated progress toward having robust ordinary dividend capacity, or evidence of a strong and solidifying market position.

Factors that could negatively impact the ratings include an inability to generally execute on its business plan, a material and unexpected increase in risk profile, departure of key personnel, lack of risk management maturation, or a material increase in risk in the investment portfolio.

To access rating and relevant documents, click here.

Click here to view the report.

Methodologies

Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.

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