30 Jan AM Best Assigns Preliminary Credit Assessment to Amherst Specialty Insurance Company
January 29, 2024 03:44 PM (EST)
BEST’S CREDIT RATING ACTION
Oldwick //BestWire// – AM Best has assigned a Preliminary Credit Assessment (PCA) to Amherst Specialty Insurance Company (Amherst) (Addison, TX) with a Financial Strength Assessment of A- pca (Excellent) and a Long-Term Issuer Credit Assessment of “a-” pca (Excellent). The outlook assigned to this PCA is stable.
The PCA reflects Amherst’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
The proposed balance sheet strength assessment is driven by AM Best’s expectation that Amherst will maintain the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio, over the five-year start up period. Additionally, the assessment is contingent upon management executing its capital strategy and injecting significant capital. The balance sheet strength assessment further reflects Amherst’s conservative investment portfolio and overall liquidity profile. Partially offsetting these factors is the company’s limited financial flexibility on a stand-alone basis.
The proposed operating performance assessment is based on Amherst’s primary business programs, which have been in place at Risk Theory Holdings (Risk Theory), an affiliated managing general agency platform, and are expected to generate positive results over Amherst’s business plan. AM Best assesses the company’s business profile as limited given the startup nature of the company and strong competition in the surplus lines industry. However, management has extensive experience operating the primary business programs, which offsets some of the execution risk involved. AM Best views Amherst’s ERM capabilities as appropriate, supported by an ERM framework with clear identification of risks, tolerances and reporting requirements. Additionally, management will utilize strong reinsurance programs to adequately preserve the capital base.
Amherst was founded in December 2023 as a Texas domiciled surplus insurance carrier. The company is a subsidiary of the ultimate parent, RTC Financial Group and received a Certificate of Authority to transact insurance business in the state on December 15, 2023. RTC is also the parent of Risk Theory. Risk Theory began underwriting in 2013 and has grown to nearly 250 employees offering multiple programs focused on the specialty market. Amherst will become the primary excess and surplus insurance paper to write all new and renewal policies of Risk Theory programs.
This press release relates to Preliminary Credit Assessments that have been published on AM Best’s website. For all assessment information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual assessments 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 and Assessment opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.