KBRA Affirms Ratings for Obsidian Insurance Holdings and Subsidiaries
23 Jul 2024 | New York
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.
The ratings for OSIC, OIC, OPIC and OIH 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 the companies will maintain sound capitalization and operating and financial metrics, and that risk management will continue to mature. Obsidian is owned by Genstar, 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.
Factors that could lead to an upgrade include sustained growth in earnings and capital, prudent management of premium leverage and risk exposures, demonstrated progress to establish robust ordinary dividend capacity, or evidence of a strong and solidifying market position.
Factors that could lead to a downgrade include material inability to execute on the business plan provided to KBRA, significant deterioration in risk profile, departure of key personnel, lack of risk management maturation, or materially increased risk in the investment portfolio.
Obsidian is a hybrid fronting carrier focused on the U.S. property/casualty and specialty markets. OIC and OPIC are admitted carriers and OSIC is a surplus lines carrier. Each program is supported by an individualized panel of reinsurers, and Obsidian underwrites and participates as a risk taker on programs.
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