AM Best Downgrades Credit Ratings of New York Schools Insurance Reciprocal
12 Julio 2024 - 3:35PM
Business Wire
AM Best has downgraded the Financial Strength Rating to B
(Fair) from A- (Excellent) and the Long-Term Issuer Credit Rating
to “bb” (Fair) from “a-” (Excellent) of New York Schools Insurance
Reciprocal (NYSIR) (Uniondale, NY). The outlook of these Credit
Ratings (ratings) is negative.
The ratings reflect NYSIR’s balance sheet strength, which AM
Best assesses as adequate, as well as its marginal operating
performance, limited business profile and marginal enterprise risk
management (ERM).
NYSIR’s balance sheet strength assessment has been revised
downward to adequate from very strong due to the continued
deterioration in risk-adjusted capitalization, as measured by
Best’s Capital Adequacy Ratio (BCAR), and policyholder surplus as
of year-end 2023 and through the first quarter of 2024. NYSIR’s
capitalization and surplus level continued to decrease primarily
from additional reserve strengthening from higher-than-anticipated
loss emergence on prior accident years, and storm-related property
losses in 2023. NYSIR has experienced unfavorable loss emergence
driven by adverse external factors impacting the general liability
environment, most notably the Child Victims Act, as well as the
impact of social inflation on liability claims costs.
NYSIR’s operating performance has been revised downward to
marginal from adequate. Despite mitigation strategies put into
place in recent years, the company’s operating performance has
deteriorated below the adequate range as evidenced by declining
underwriting and operating metrics. The high loss emergence from
the impact of social inflation on liability claim costs, increased
property loss costs, and higher-than-usual sexual assault and
molestation claims led to poor results in 2023 following 2022 when
NYSIR also had a significant overall loss. Loss results in 2023
also were driven by the continued effort to improve carried loss
reserves from prior accident years, particularly on the general
liability line of business. In addition, NYSIR’s property losses in
2023 drove deteriorating results and the elevated losses incurred
during the year. Severity of claims in recent years has spiked also
due to economic inflation contributing to the higher-than-average
property losses.
NYSIR’s business profile has been revised downward to limited
from neutral. As an insurance reciprocal, NYSIR’s mission is to
help subscribers provide a safe environment for students, staff and
visitors, and to assist in protecting their physical assets. NYSIR
remains the leading insurer of public schools in New York offering
property, general liability, automobile liability and physical
damage, school board legal liability and excess catastrophe
liability policies to school districts across 50 New York counties.
However, due to high geographic concentration and segment risk, the
reciprocal has been impacted by recent social and political events,
which has exposed NYSIR to significant regulatory risk due to
changes in legislation leading to deteriorating operating
performance results and capital strength.
NYSIR’s ERM has been revised downward to marginal from
appropriate. Although historically, the company’s ERM has been
considered appropriate, NYSIR’s risk awareness and pricing
management has come into question following significant reserve
strengthening driving the decline in surplus and operating
performance. NYSIR’s appropriateness over claims handling and
reserving, along with management’s reactions to address the
challenges in the market in which the reciprocal operates, has led
to deterioration in the company’s overall balance sheet strength
and operating performance. NYSIR has implemented risk mitigation
strategies such as expanded control over reserving, revamped claims
process, coverage and rate changes, and limit changes; however, it
remains to be seen if NYSIR’s strategic initiatives will return
performance back to historical results.
NYSIR continues to have strong support from highly rated
reinsurance participants as the 2024 program was completed with
ample capacity. In addition, NYSIR has strong support from its
subscribers as retention remains strong despite significant rate
and coverage changes recently put into place.
The negative outlooks reflect AM Best’s outstanding concerns
surrounding the reciprocal’s ERM practices and initiatives put into
place to turnaround operating results and strengthening NYSIR’s
balance sheet. Further negative action could occur if the company’s
balance sheet strength does not improve as a result of further
surplus deterioration, unfavorable loss emergence, continued
adverse development, weather related events, or decline in
regulatory capital position. However, management is expecting its
initiatives and strategy, which have been reviewed and approved by
the New York State Department of Financial Services, to address the
challenges NYSIR faces in its market and remain an integral part of
the New York state public education market.
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 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. For more information,
visit www.ambest.com.
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Anthony Molinaro Senior Financial Analyst +1 908 882
2129 anthony.molinaro@ambest.com
Christopher Sharkey Associate Director, Public
Relations +1 908 882 2310
christopher.sharkey@ambest.com
Vicky Riggs Associate Director +1 908 882
2273 vicky.riggs@ambest.com
Al Slavin Senior Public Relations Specialist +1
908 882 2318 al.slavin@ambest.com