AM Best Removes From Under Review Credit Ratings of Best Meridian Ins Co, Best Meridian Int Ins Co; Assigns Negative Outlooks.

ENPNewswire-September 16, 2021--AM Best Removes From Under Review Credit Ratings of Best Meridian Ins Co, Best Meridian Int Ins Co; Assigns Negative Outlooks

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Release date- 15092021 - AM Best has removed from under review with negative implications and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings of 'a-' (Excellent) of Best Meridian Insurance Company (BMIC) (Miami, FL) and Best Meridian International Insurance Company SPC (BMIIC) (Grand Cayman, Cayman Islands).

The outlook assigned to the Credit Ratings (ratings) is negative.

The ratings reflect BMIC'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.

The negative outlooks reflects the declining trend in risk-adjusted capitalization measures driven by deterioration in the quality of the mortgage portfolio at both companies and a sharp increase in reinsurance recoverables associated with a relatively new property/casualty reinsurance business at BMIIC. In addition, during the first six months of 2021, the growth of capital and surplus has been impacted negatively by sizeable underwriting losses related to elevated death claims from the COVID-19 pandemic.

While the organization has a successful history of profitable returns on its directly issued mortgage portfolio, the properties are concentrated in Florida, which experienced significant economic downturn during 2020 due to the COVID-19 pandemic. As a result, close to one-half of the mortgage portfolio was either past due or in foreclosure status at year-end 2020. However, the mortgage portfolio has a relatively low loan-to-value ratio with high quality properties, which has allowed the organization to restore the mortgages gradually to good standing during 2021.

The growing capital pressure from the high reinsurance recoverables is due to increased volume of unrated counterparties at BMIIC. The company has a rigorous screening process and contractual measures in place to reduce the risk of disputes and nonperformance of counterparties. Since BMIIC entered the property/casualty reinsurance business in 2018, 100% of recoverables has been collected with no disputes. However, AM Best...

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