AM Best revised the outlook for Golden Bear Insurance Company from stable to negative, while the ratings agency affirmed the carrier’s Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent).
The ratings reflect Stockton, California-based Golden Bear’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
“The revised outlooks to negative from stable reflect escalation in adverse loss reserve development patterns that have been reported in recent periods, elevating the need for underlying performance to offset reserve volatility,” AM Best stated. “In addition, the negative outlooks reflect concerns with the efficacy of GBIC’s ERM practices when it comes to managing reserve developments. Furthermore, the negative outlooks contemplate growing tail risk driven by earthquake coverage as it relates to the company’s ERM program.”
According to AM Best, Golden Bear management implemented a series of initiatives to reverse the adverse developments, which stem primarily from the hospitality and habitational lines of business. The steps include applying assault and battery exclusions, limiting liquor coverage in certain states, eliminating large affordable housing accounts, focusing on complex claims, strengthening analytics and reporting of claims and coordinating with outside actuaries to build reserves back up to actuarial central estimates.
“The expectation is for these initiatives to gain traction to alleviate pressure on GBIC’s operating performance and ERM,” AM Best stated.
AM Best assesses the carrier’s balance sheet strength as very strong, driven by what the ratings agency said is the strongest level of risk-adjusted capitalization, consistent growth in surplus in recent years, a conservative investment portfolio and net underwriting leverage.
It assesses the company’s operating performance as strong, which reflects consistent positive earnings. AM Best assesses Golden Bear’s business profile as neutral as the company is a specialty insurance writer, offering surplus lines coverage across the U.S. and admitted coverage in California and Arizona.
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