The credit rating agency AM Best Co. Inc. changed its A financial strength rating outlook on Canopius US Insurance Inc. and Canopius Reinsurance Ltd. on Friday. (Bermuda) from stable to negative, citing pressure on the balance sheet.
The underwriting results for the units of Canopius Group Ltd. recovered in 2021 from “underperformance” in 2017-2020, but their capital adequacy ratio fell to “strong” from “very strong,” according to Oldwick, New Jersey-based Best.
The units are expected to report improved underwriting results for 2022 but their overall results could suffer from unrealized fair value losses on fixed income investments, Best said in a statement.
“While Canopius̵7; risk-adjusted capitalization is expected to improve significantly in the near term, which would mitigate the negative pressure on the ratings, a negative rating action is likely if this does not occur,” Best said.
A- is generally considered the lowest rating that insurers can have and remain on many brokers’ safe insurance lists.