KBRA Downgrades and Withdraws Rating for Sublimity Insurance Company
17 Sep 2024 | New York
KBRA downgrades the insurance financial strength rating (IFSR) for Sublimity Insurance Company (SIC) from BBB to BB+. The outlook has been changed from Stable to Negative. The downgrade reflects the continued deterioration in underwriting results in the first six months of 2024, which drove a net loss of $3.6 million and a $3.7 million, or 26% reduction in surplus. The decrease in surplus has led to a deterioration in underwriting leverage metrics. The change in outlook from Stable to Negative reflects KBRA’s concerns about the potential for future underwriting losses and further deterioration in surplus and how that may impact SIC’s ability to meet its policyholder obligations. KBRA acknowledges that the company is exploring reinsurance options including a loss portfolio transfer or quota share transaction to eliminate claims loss risk to SIC, but a transaction has yet to be consummated. Subsequently KBRA withdraws the IFSR at the the request of the company.
Key Credit Considerations
The rating reflects SIC's consistent net investment gains and synergies from its shared services operating model. Offsetting these strengths are the company's unfavorable underwriting performance, geographic risk concentration, catastrophe exposure, and uncertainty with respect to future reinsurance coverage as Sublimity winds down operations.
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