AM Best revises outlooks of Golden Insurance Company to ‘negative’

AM Best has revised the outlooks to negative from stable and affirmed the financial strength rating of B (Fair) of Golden Insurance Company, a risk retention group (Golden). Mitigating factors includes Golden’s profitable earnings in recent years and the addition of a more reputable captive manager.

The revised outlooks reflect Golden’s declining risk-adjusted capital position and enterprise risk management (ERM) concerns. The company’s capital is strained in recent years due to excessive premium growth, which has resulted in elevated underwriting leverage ratios and growth charges.

Mitigating factors includes Golden’s profitable earnings in recent years and the addition of a more reputable captive manager. Golden contracted with Strategic Risk Solutions (SRS) on June 1, 2016, to assume the role of the company’s captive manager. SRS brings experience in financial reporting and ERM, which will be highly valuable to the company going forward.

In addition, Golden’s reserves have shown unfavorable development on an accident and a calendar-year basis. This reserves inadequacy may cause further stress on surplus in the coming years.

Concerns also remain with Golden’s risk management practices, as multiple issues have arose over the latest five-year period. In recent years, the company has had to correct prior financial statements following annual audits and regulatory reviews.

Additionally, concerns remain with the financial security of Golden’s warranty administrator. The majority of the company’s business flows through their administrator, therefore, financial instability at that level could cause a disruption in operations.