AM Best affirms Riverfront Insurance ratings, revises outlook to negative

AM Best has revised the outlooks to negative from stable and affirmed the financial strength rating of A- and the long-term issuer credit rating of “a-” of Riverfront Insurance.

Concurrently, AM Best has withdrawn these ratings as Riverfront has requested to no longer participate in AM Best’s interactive rating process.

The ratings reflect Riverfront’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).

Riverfront’s balance sheet strength is supported by its strongest level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), but offset by a high annual aggregate retention level relative to surplus. The parent supports the company’s balance sheet with a net worth maintenance agreement to be used if necessary.

AM Best assesses Riverfront’s operating performance as adequate based on favourable metrics the company demonstrated over the past few years. Riverfront was created in response to hard market conditions for directors & officers and errors & omissions coverage from a parent with roots in the student loan industry. However, the elevated risk from that association has largely subsided and is also mitigated as Riverfront writes claims-made policies covering claims reported in the policy year of coverage (none to date). Riverfront’s ERM is integral to Navient Corporation from whence it originated to cover a portion of potential exposure subject to market pricing and conditions. Riverfront does not use reinsurance.

The negative outlooks reflect pressures on the company's risk-adjusted capitalisation with the possibility of a significant decrease in shareholder equity.

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