AM Best Downgrades Credit Ratings of James River Group Holdings, Ltd. and Subsidiaries
AM Best has downgraded the Financial Strength Rating (FSR) of James River Group Holdings, Ltd. (JRVR) from A to A-, with a negative outlook. The Long-Term Issuer Credit Ratings (ICR) for its operating subsidiaries have also dropped. This decision reflects weaknesses in the company's enterprise risk management following Q1 earnings, particularly in risk controls and culture. Despite a strong balance sheet assessment, concerns about adverse reserve development in commercial auto lines persist. The company quickly replenished capital via a stock offering, but long-term stability in reserves is needed.
- The company's balance sheet strength is assessed as very strong.
- James River Group was able to quickly replenish capital through a common stock offering.
- Financial Strength Rating (FSR) downgraded from A to A-.
- Long-Term Issuer Credit Ratings (ICR) downgraded to 'a-' from 'a'.
- Concerns regarding adverse reserve development in commercial auto lines.
- Weaknesses identified in enterprise risk management, including risk tolerances and management controls.
AM Best has downgraded the Financial Strength Rating (FSR) to A- (Excellent) from A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) to “a-” from “a” of the rated operating subsidiaries of James River Group Holdings, Ltd. (JRG Holdings) [NASDAQ: JRVR]. In addition, AM Best has downgraded the Long-Term ICR to “bbb-” from “bbb” of JRG Holdings. The outlook of these Credit Ratings (ratings) is negative. JRG Holdings is domiciled in Pembroke, Bermuda, while its subsidiaries are based in Pembroke, Richmond, VA, and Raleigh, NC. (See below for a detailed listing of the subsidiaries.)
The ratings reflect the group’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and marginal enterprise risk management.
The rating downgrades follow the release of first-quarter earnings and reflect a reduction in the assessment of the group’s enterprise risk management. The risk management capabilities of the organization proved to have weaknesses in risk tolerances, non-modelled risks, management controls and risk culture. The current ERM framework and risk evaluation needs to evolve proactively and demonstrate competencies necessary to mitigate any effect on the organization’s balance sheet strength, operating performance or business profile. The negative outlooks reflect AM Best’s concerns with the group's balance sheet strength assessment given the recurring nature of adverse reserve development in commercial auto lines. While JRG Holdings was able to replenish capital quickly via a common stock offering, AM Best’s view is that long-term mitigation of the impact of adverse reserve development is necessary to demonstrate stability in reserves and consistent risk-adjusted capital composition.
The FSR has been downgraded to A- (Excellent) from A (Excellent) and the Long-Term ICRs downgraded to “a-” from “a” with negative outlooks for the following subsidiaries of James River Group Holdings, Ltd.:
- James River Insurance Company
- James River Casualty Company
- Falls Lake National Insurance Company
- Stonewood Insurance Company
- Falls Lake Fire and Casualty Company
- JRG Reinsurance Company Ltd.
- Carolina Re, Ltd.
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 London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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