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AM Best Revises Outlooks to Negative for Capacity Insurance Company
[July 30, 2020]

AM Best Revises Outlooks to Negative for Capacity Insurance Company


AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of "bbb-" of Capacity Insurance Company (Capacity) (Sunrise, FL).

The Credit Ratings (ratings) reflect Capacity's balance sheet strength, which AM Best categorizes as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).

The revised outlooks to negative from stable are based on Capacity's deterioration in underwriting results and operating performance in recent years, which culminated in a moderate decline in policyholders' surplus in 2018 and 2019. The deterioration was driven by ongoing catastrophic weather activity, resulting in net incurred losses of $423,000 in 2017 from Hurricane Irma claims, net incurred losses of $500,000 in 2018 from Hurricane Michael claims and net incurred losses of $494,000 in 2019 from Texas wind/hail storm claims. The deterioration also was driven by a continuation of materially adverse loss reserve development on Capacity's liability portion of commercial multiple-peril and general liability lines of business. This deterioration in underwriting results, operating performance and policyholders' surplus has continued into 2020. The negative outlooks also reflect some weaknesses in Capacity's ERM, which led to recent unplanned shifts in the strategic direction of the company.

In response, Capacity is in the process of implementing numerous pricing enhancements, which should result in significantly improved rate adequacy going forward. Capacity also is implementingtighter controls surrounding loss reserves and more frequent actuarial reviews. Additionally, Capacity ceased writing Texas new business on May 1, 2020, and has submitted a Texas withdrawal plan to the Texas Department of Insurance. While these initiatives may result in performance stabilization, their ultimate effectiveness is uncertain at this time.



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 media use of Best's Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best's Credit Ratings and AM Best Rating Action Press Releases.

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 New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.


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