AM Best Downgrades Credit Shares for Bankers Insurance Group Members

OLDWICK, NJ–(BUSINESS WIRE)–AM Best has lowered the Financial Strength Rating to B+ (Good) from B++ (Good) and the Long-Term Credit Rating to “bbb-” (Good) from “bbb” (Good) for members of the Bankers Insurance Group (Banks). Members of the group are Bankers Insurance Company (St. Petersburg, FL) and its property/casualty, Bankers Specialty Insurance Company (Metairie, LA) and First Community Insurance Company (St. Petersburg, FL). These Credit Profiles (sections) are incorrect.

The ratings reflect the Bank’s strong financial position, which AM Best considers strong, as well as its slow operating performance, limited business history and effective corporate governance (ERM).

The downgrade of the Bank’s ratings reflects the ongoing deterioration of liquidity and the continuing difficulty in expanding reserves. Bankers have reported that liquidity has declined in four of the past five years due to a significant write-off. This trend has continued with a further decrease in the increase through the first half of 2022. Savings, which continue to grow negatively, have been affected in recent years due to the spread of inflation in the line of business of homeowners. Management systems, which in the past made development difficult, have improved due to the growth of reserves over the years and the reduction of visibility in terms of speed.

The negative outlook is based on the above which raises concerns about the effectiveness of Bankers’ ERM program in dealing with current and emerging risks. Bankers offer personal services in Florida, Louisiana and South Carolina, which exposes the group to the weather conditions associated with coastal areas. Inflationary problems, particularly in Florida, and rising reinsurance costs have hampered the group’s performance. The administration has responded by implementing a number of maintenance measures, including not updating critical threats and a manned power line evacuation plan in Florida, Louisiana and South Carolina. Exiting these sectors could set the tone as the homeowner’s row is driving the volatility seen over the past five years due to the increase in hurricanes and their severity. Hopefully, Banks are looking to focus on commercial and guarantee risks (ie, bail bonds), as both have produced sufficient results for the group in the past. While these efforts may have a significant impact on the risk profile and sustainability of outcomes, the effectiveness of these efforts and their economic and operational impact are unknown.

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