AM Best downgrades British American Insurance Company

AM Best has downgraded its long-term issuer credit rating (ICR) of British American Insurance Company (BAIC). The captive of Austin Industries, one of the largest construction companies in the United States, it saw its long-term ICR cut to “a” (Excellent) from “a+” (Excellent).

However, Best affirmed BAIC’s financial strength rating (FSR) of A (Excellent) and revised its outlook for the long-term ICR from negative to stable. Its outlook for the FSR is also stable.

“The downgrade of the long-term ICR is a result of volatile operating performance in recent years and unfavourable combined ratios in 2017-2018 and again in 2020. Management believes these results to be anomalies and has added resources to the claims and reserves review process,” the agency explained.

“The long-term ICR outlook revision to stable is due to measures taken by BAIC to stabilise its operating performance, including the implementation of frequent actuarial reviews and other risk management measures,” it added.

According to the agency, the credit ratings reflect BAIC’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile, and appropriate enterprise risk management.

A single-parent captive, BAIC accesses business from its parent, which is focused principally on Texas and across the Southern US. It is licensed in Texas and writes all its direct business in the state. It also uses fronting carriers for those business activities conducted outside Texas. Coverages provided to Austin Industries and its affiliates include workers’ compensation, general liability, commercial automobile and surety. Excess of loss reinsurance above a self-insured retention is maintained for all lines of business, Best noted.

“The company benefits from a solid management team with significant depth of experience in the insurance and construction industries who are employed by Austin Industries, Inc,” the agency added.