A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit ratings (ICR) of “a” of Housing Authority Property Insurance, A Mutual Company (HAPI), Housing Authority Risk Retention Group, Inc. (HARRG) and their jointly owned subsidiary, Housing Enterprise Insurance Company, Inc. (all members of and together known as the HAI Group). The outlook for these ratings is stable. Concurrently, A.M. Best has affirmed the FSR of A- (Excellent) and the ICR of “a-” of Housing Specialty Insurance Company, Inc. (HSIC). The outlook for both ratings is stable. All companies are domiciled in Burlington, VT.
The ratings of the HAI Group acknowledge its excellent capitalization, very strong operating results, leading position and proven expertise in the niche public housing authority market. A.M. Best deviated from its “Rating Members of Insurance Groups” criteria in regard to certain ownership limitations, which relate to the existence of a risk retention group within the HAI Group.
The HAI Group provides property and liability coverage to public housing authorities and their affiliated operations throughout the United States. While retaining a large percentage of its member insureds and regularly adding new members, the group maintains a market share of about 40% of this segment on a per unit basis. With its solid operating performance, the HAI Group has progressively built up its surplus through retained earnings as its underwriting leverage is very low. The group’s underwriting results remain strong due to its focused and disciplined underwriting approach and conservative reserving. Over the years, it has increased rates when appropriate and withdrawn from problematic accounts and lines of business, such as workers’ compensation. In addition, the HAI Group’s operating performance benefits significantly from effective enterprise risk management, its tax-efficient structure and strong client relationships, which are supported by a number of customized programs and services. The ratings also recognize management’s conservative operating strategy, consistent with the member insureds’ expectations. The group maintains a conservative investment portfolio and prudently utilizes reinsurance.
Partially offsetting these positive rating factors is the group’s concentration of risk in the public housing authority sector, which magnifies the impact of market cycles and public policy and legislative changes.
A.M. Best expects the HAI Group’s future operating performance to be stable and strong; as the stable earnings profile should support controlling its growth and business writings, which are consistent with its capital and surplus position.
The ratings of HSIC reflect its strong capital position and the support it receives from the HAI Group. HSIC is an excess and surplus lines insurer that will be providing a non-traditional insurance program to public and affordable housing providers throughout the United States, as well as a for-profit, property/casualty stock insurer, which was incorporated in Vermont on Dec. 9, 2013. The company is jointly owned by HARRG and HAPI as a subsidiary.
Partially offsetting these positive rating factors is the start-up nature of the company, which is mitigated by the successful performance and support of the HAI Group.
Positive rating impact is likely if additional capital is infused thus improving the capital position of the company. Negative rating impact could occur if underwriting performance shows decline and demonstrates volatility negatively impacting earnings and capitalization over time. Negative rating impact could occur if there were a material shift in risk profile that could potentially undermine the stability and profitability of the company.
A.M. Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated in the United States and throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative insurance market, please visit www.ambest.com/captive.
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