Best Downgrades Erika Insurance Rating to ‘B++’
A.M. Best Co. announced that it has downgraded the financial strength rating to “B++” (Very Good) from “A-” (Excellent) of Swedish-based Erika Insurance Ltd. with a stable outlook.
“The downgrade reflects A.M. Best’s reassessment of Erika’s role within the EF Group, a provider of language courses worldwide, and the increased risk associated with the high dependence upon reinsurance from an affiliated company, Efekta Insurance Ltd. (Efekta),” said the announcement. “The rating also factors Erika’s prospective improvement in earnings following the divestment of third party business.”
Best noted that “Erika insures only those risks of EF clients, making it dependent upon the highly volatile travel industry, negatively impacting Erika’s business flow and risk profile.
“Since the divestment of third party business in 2003, there has been a significant increase in the credit and liquidity risk associated with Erika as it cedes 85 percent of the gross premiums written to Efekta, (EF’s reinsurance captive based in Bermuda). Credit and liquidity risk is further exacerbated by a non-callable loan arrangement between Efekta and an EF group subsidiary.”
Best said it “expects Erika’s operating performance to improve from a lower loss ratio due to the company’s better control of claims for group related business and reduced net premium. Historically, the EF business has had a very good record with an average loss ratio of 45 percent over the last four years.”
- New York City’s Biggest Taxi Insurer Is Insolvent, Risking Transit Meltdown
- Hertz Tower Demolition Marks End of Hurricane-Damaged Landmark in Lake Charles
- Florida Governor Floats Condo Relief Session; Condo Captive Idea Flagging
- Red Lobster Landlord Sues Insurer to ‘Clawback’ $1.2M Fire Claim Payment