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A.M. Best Removes From Under Review and Affirms Credit Ratings of Knight Insurance Company Ltd. and Affiliates
[October 05, 2017]

A.M. Best Removes From Under Review and Affirms Credit Ratings of Knight Insurance Company Ltd. and Affiliates


A.M. Best has removed from under review with negative implications and affirmed the Financial Strength Ratings (FSR) of B++ (Good) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of "bbb+" of Knight Insurance Company Ltd. (Knight Insurance) (Cayman Islands) and its reinsured U.S. insurance company subsidiary, Knight Specialty Insurance Company (Wilmington, DE). The outlook assigned to the FSR is stable, while the outlook assigned to the Long-Term ICRs is negative.

Concurrently, A.M. Best has removed from under review with negative implications and affirmed the FSR of B++ (Good) and the Long-Term ICR of "bbb" of its affiliate, KnightBrook Insurance Company (KnightBrook) (Wilmington, DE). The outlook assigned to these Credit Ratings (ratings) is negative. The rating actions follow the completion of the 2016 financial audits, as well as the 2015 and 2016 financial audits of the companies' parent, Knight Holdings, Inc.

The ratings reflect Knight Insurance's excellent risk-adjusted capitalization and the strategic role Knight Insurance performs as member of the Hankey Group, a group of companies that operates in the retail automotive industry. Partially offsetting these positive rating factors are continued concerns with regard to heightened execution risk due to significant historical business growth of the companies in recent years, and related uncertainty regarding loss-reserve and premium adequacy, although premium volume has decreased in 2016. These concerns are amplified by sizable adverse loss development beginning in 2014, and the potential for a continuation of that trend to adversely impact future operating results and risk-adjusted capitalization. In addition, there were concerns with financial reporting internal controls as evienced by a number of significant prior period adjustments recorded in the 2016 audited financial statements of Knight Insurance to correct errors in the recording of a number of transactions over the past few years, which were audited by the predecessor audit firm. Management believes such errors will not recur. Lastly, Knight Insurance and KnightBrook have moderate common stock leverage relative to the composite.

Knight Insurance and KnightBrook's capitalization has been supported by substantial capital injections over the years to support growing business volumes.

As a wholly owned reinsurer, Knight Insurance generates a significant portion of business from an affiliated automotive finance company, but it also has written programs and unaffiliated third-party business. It also assumes business from KnightBrook and Knight Specialty Insurance Company via significant quota shares.


This press release relates to Credit Ratings that have been published on A.M. 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 A.M. Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best's Credit Ratings. For information on the proper media use of Best's Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best's Credit Ratings and A.M. Best Rating Action Press Releases.

A.M. Best is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.


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