AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings of “a-” (Excellent) of the operating entities of Trisura Group Ltd. (Trisura) [TSX:TSU] (Toronto, Ontario, Canada), which include Trisura Specialty Insurance Company (TSIC), Trisura Insurance Company (TIC), Bricktown Specialty Insurance Company (BSIC) and Trisura Guarantee Insurance Company (TGIC). TSIC, TIC, and BSIC are domiciled in Oklahoma City, OK, while TGIC is domiciled in Toronto, Ontario, Canada.
The Credit Ratings (ratings) reflect Trisura’s overall 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 reflect required improvements in Trisura’s operational risk management processes around management of captives within its U.S. operations. While Trisura is actively addressing these issues from a policy, organizational and corporate governance perspective, AM Best notes that the effectiveness of these actions will require time to evaluate.
The revision of the outlooks to negative from stable follows a CAD 81.5 million one-time write-down of reinsurance recoverables in the fourth quarter of 2022, which substantially offset consolidated net income, though the company maintained a profitable year. This write-down originated from a reinsurance recoverable related to a fronting program for a captive reinsurance program on U.S. property/casualty risks. The write-down was necessitated by lack of sufficient collateral to support the recoverable as higher catastrophe reinsurance costs required by Trisura to manage catastrophe risk had the effect of depleting the program’s collateral. Subsequent to the write-down, the program has been put into accelerated runoff and the company is continuing the implementation of enhanced policies, procedures and organizational changes to the group’s corporate governance practices.
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