|[August 01, 2014]
A.M. Best Affirms Ratings of Castle Key Group Members
OLDWICK, N.J. --(Business Wire)--
A.M. Best has affirmed the financial strength rating (FSR) of B-
(Fair) and the issuer credit ratings (ICR) of "bb-" of the members of Castle
Key Group (Castle Key) (headquartered in St. Petersburg, FL). The
outlook for all ratings is negative. (See below for a detailed listing
of the companies.)
The ratings and outlook reflect Castle Key's poor overall capitalization
when measured on a catastrophe stress-tested basis and geographic
business concentration resulting in a susceptibility to catastrophic
loss accumulation. Castle Key is the dedicated Florida property writer
for its parent company, Allstate Insurance Company (Allstate),
and it maintains significant exposure to hurricanes, with a
corresponding substantial reliance on catastrophe reinsurance. In
addition, Castle Key's reinsurance program relies heavily upon the
Florida Hurricane Catastrophe Fund (FHCF).
These negative rating factors are partially offset by Castle Key's
recently improved operating performance, which has been positively
impacted by favorable loss activity due to increased rates and an
absence of any hurricane events.
A.M. Best deviated from its "Rating Members of Insurance Groups" rating
criteria by providing more than two FSR levels of ratingenhancement to
Castle Key's stand-alone assessment. However, the additional rating
enhancement acknowledges the historical financial and operational
support provided to Castle Key as part of the Allstate organization.
Although Castle Key is separately capitalized and not reinsured by
Allstate, in A.M. Best's opinion, parental support regarding the
claims-paying ability of Castle Key will be maintained commensurate with
its rating level in the event of frequent and/or severe hurricane
activity. If parental support is not provided, it would be necessary for
A.M. Best to re-evaluate the current FSR of A+ (Superior) and ICRs of
"aa-" of Allstate and all the remaining members of the Allstate
Future positive rating actions may result if Castle Key maintains
favorable underwriting trends along with capital accumulation. However,
negative rating actions could result if parental support is not provided
in the case of multiple significant events.
The FSR of B- (Fair) and ICRs of "bb-" have been affirmed for the
following members of the Castle Key Group:
Castle Key Insurance Company
Castle Key Indemnity Company
Encompass Floridian Insurance Company
Encompass Floridian Indemnity Company
The methodology used in determining these ratings is Best's Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best's rating process and contains the different rating criteria
employed in the rating process. Best's Credit Rating Methodology can be
found at www.ambest.com/ratings/methodology.
A.M. Best Company is the world's oldest and most authoritative
insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS
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