KBRA Affirms Ratings for Tower Hill Insurance Group; Changes Outlook for Tower Hill Prime Insurance Company to Negative
14 Jun 2024 | New York
KBRA affirms the A- insurance financial strength rating (IFSR) for Tower Hill Prime Insurance Company (THP), the BBB+ IFSR for Tower Hill Insurance Exchange (THIE), and the BB+ long term credit rating (LTCR) for the $200 Million Senior Surplus Notes issued by THIE. KBRA assigns a LTCR of BB+ to the additional $95 Million Senior Surplus Notes issued by THIE in May 2024. The outlook for THP has been changed to Negative from Stable. The outlooks for all other ratings is Stable.
The change in outlook to Negative from Stable for THP reflects the deterioration in overall and risk-adjusted capitalization driven by underwriting losses in the last four years. Although KBRA recognizes the potential improvement in operating performance from exiting the Florida personal lines business, the partnership with an E&S carrier to write its commercial business, and other underwriting actions, the benefits of these actions need to materialize in improved financial metrics over the next 12 to 24 months.
The ratings reflect the companies' experienced management team, adequate catastrophe reinsurance, declining but still adequate risk-adjusted capital metrics, and conservative investment portfolio. Offsetting these positives are the deterioration in underwriting performance, product and geographic concentration, and catastrophe exposure and reinsurance dependence.
Factors that could positively impact the rating include sustained operating profitability, material organic surplus growth, reduced volatility and sustained improvement in loss reserve development trends at THP, improved underwriting leverage , or a favorable change in risk profile. Factors that could negatively impact the rating include weather events negatively impacting the balance sheet, continued underwriting losses, continued deterioration in underwriting leverage, significant negative variance to projections provided to KBRA, an inability to obtain reinsurance on acceptable terms and pricing, causing an increase in loss exposure, a reduction in the company’s ability to underwrite policies or a drag on earnings, a material decline in credit quality of the reinsurance panel and/or inability to collect on reinsurance causing a material adverse effect on operating results and overall financial condition, or an unfavorable change in risk profile.
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