AM Best Places credit ratings under review with negative implications for Rockingham Insurance Company and its affiliates | Business Insurance

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OLDWICK, New Jersey–(COMMERCIAL WIRE)–I am better has placed under review with negative implications the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Ratings of “a” (Excellent) of Rockingham Insurance Company and its grouped affiliates: Rockingham Casualty Company and Rockingham Specialty, Inc. All companies are domiciled in Harrisonburg, VA and are collectively referred to as the Rockingham Group or the group.

These credit ratings (ratings) reflect the strength of the Rockingham Group’s balance sheet, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and adequate enterprise risk management.

The group’s ratings have been placed under review with negative implications following its June 30, 2022 quarterly filing reflecting a 14% decline in group surplus. The drop in surplus was driven by net operating losses of approximately $7.8 million and a net capital loss of $4.7 million. This generated a significant decline in the group’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). Prior to the most recent capital decline, Rockingham Group’s technical leverage measures have continued to rise in recent years, driven primarily by growth in premiums along with their associated liabilities, which have substantially outpaced growth in the group’s surplus. This, in turn, has put negative pressure on the overall assessment of Rockingham’s balance sheet strength.

The group is currently in the process of potentially stabilizing its balance sheet through a capital injection, most likely in the form of an unaffiliated surplus note. While this may ultimately result in an improvement in risk-adjusted capitalization, the ultimate impact on the ratings is uncertain given the execution risk to complete the transaction in a timely manner and finalized terms and conditions. The ratings will remain under review pending the completion of the capital improvement plan and AM Best’s assessment of the full impact of these efforts on Rockingham Group’s risk-adjusted capitalization.

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This news release relates to credit ratings that have been posted on AM Best’s website. For full rating information related 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 on the use and limitations of credit rating opinions, see Best Credit Score Guide. For information on the proper use of Best’s Credit Ratings, Best’s Performance Reviews, Best’s Preliminary Credit Reviews, and AM Best’s press releases, see Guide to the proper use of Best ratings and evaluations.

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