OLDWICK, N.J.–(BUSINESS WIRE)–AM Best has downgraded the Financial Strength Rating (FSR) to A-
(Excellent) from A (Excellent) and the Long-Term Issuer Credit Rating
(Long-Term ICR) to “a-” from “a” of SUMIT Insurance Company Ltd. (SUMIT)
(Pembroke, Bermuda). The outlook of these Credit Ratings (rating) is
stable. Concurrently, AM Best has withdrawn the ratings at the request
of the company to no longer participate in AM Best’s interactive rating
process.
The ratings reflect SUMIT’s balance sheet strength, which AM Best
categorizes as very strong, as well as its marginal operating
performance, limited business profile and appropriate enterprise risk
management.
The downgrades reflect a material decline in surplus during the
company’s fiscal-year 2018 due to significant adverse development on
medical professional liability (MPL) claims as well as a dividend
payment. Reserves increased by 45% from the prior year while surplus
declined by 33%, which increased underwriting leverage metrics.
Commensurately, risk-adjusted capitalization, as measured by Best’s
Capital Adequacy Ratio (BCAR), declined significantly. SUMIT effectively
retains $10 million per claim, which is high relative to surplus, and
leaves the company exposed to increases in frequency and severity of
claims.
Operating performance has been very volatile, with underwriting losses
reported in four of the most recent five years, including a substantial
loss in 2018. Nevertheless, the company serves an important strategic
purpose as a captive insurance vehicle for Stanford Health Care and
benefits from the robust financial strength of its ultimate parent,
Stanford University.
AM Best remains the leading rating agency of alternative risk
transfer entities, with more than 200 such vehicles rated in the United
States and throughout the world. For current Best’s Credit Ratings and
independent data on the captive and alternative risk transfer insurance
market, please visit www.ambest.com/captive.
This press release relates to Credit Ratings that have been published
on AM Best’s website. For all rating information relating to the release
and pertinent disclosures, including details of the office responsible
for issuing each of the individual ratings referenced in this release,
please see AM Best’s Recent
Rating Activity web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view Understanding
Best’s Credit Ratings. For information on the proper media
use of Best’s Credit Ratings and AM Best press releases, please view Guide
for Media – Proper Use of Best’s Credit Ratings and AM Best Rating
Action Press Releases.
AM Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit www.ambest.com
for more information.
Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.
Contacts
Connor Brach, FRM
Financial Analyst
+1 908
439 2200, ext. 5573
[email protected]
Christopher
Sharkey
Manager, Public Relations
+1 908 439
2200, ext. 5159
[email protected]
Sharon
Pereira Marks
Senior Financial Analyst
+1 908
439 2200, ext. 5477
[email protected]
Jim
Peavy
Director, Public Relations
+1 908 439
2200, ext. 5644
[email protected]
