Insurance rating downgraded

Cayman General chief calls action unfair

A well known worldwide insurance rating company announced Thursday it is downgrading the financial strength rating of Cayman General Insurance Company Limited from A- (Excellent) to B- (Fair).

The announcement was made in an A.M. Best Co. press release, which said the rating remains under review with negative implications.

‘This rating downgrade reflects the magnitude of the damage caused by Hurricane Ivan and the significant amount of estimated losses affecting Cayman General’s risk-adjusted capital position,’ the release stated.

‘This rating action also recognizes the anticipated substantial decline in Cayman General’s capital base due to the accumulation of losses from Hurricane Ivan,’ the release stated.

Danny Scott, president CEO of Cayman General Insurance, said the action is unfair.

‘I spoke with them (A.M. Best) two weeks ago, and told them I wasn’t prepared to speculate on the figures,’ said Mr. Scott. ‘I told them we are solvent and that we are continuing to operate. It was quite naughty of them to put that out.’

A.M. Best said Cayman General did not provide it with hurricane loss information and a recapitalization plan, and as a result, ‘based this rating action upon industry loss estimates and Cayman General’s market share information.

‘In A.M. Best’s opinion, the company has limited access to substantial levels of additional capital that would return Cayman General to the secure rating range. Resolution of the under review status is predicated on the receipt of Cayman General’s current loss reserve position, a formal recapitalization plan and completion of the due diligence process.’

Best said its concern centres on Cayman General’s risk-adjusted capitalization, particularly with regard to the elevated probable maximum loss and the company’s ability to absorb a subsequent catastrophic event.

Mr. Scott said it was not a case of Cayman General not willing to cooperate in providing A.M. Best with information. ‘When I go down my list of priorities, it is to make sure that our clients’ claims are being dealt with; that was at the top of that list,’ he said.

In addition, Mr. Scott said the figures are not known.

‘We have not yet received our first review reports from our adjusters. They’re supposed to be going through this process now, and when we have those figures in the next week or so, we’ll provide them to AM Best.’

It is normal for the initial percentages of claim payouts in relation to insured value to go down, often as much as 25 percent Mr. Scott said. ‘We’re not prepared to guess at the final figures. We don’t believe in making things sound worse than they are.’

Mr. Scott said that the downgrading came only days after AM Best sent him a letter to sign, which he refused to do.

The financial strength ratings of Cayman General, British Caymanian Insurance Company Ltd and Island Heritage Insurance were all put under review with negative implications in the immediate aftermath of Hurricane Ivan’s hitting Grand Cayman.

‘These rating actions reflect the uncertainty surrounding the ultimate net exposure from Hurricane Ivan and its impact on the capitalization of each company,’ said A.M. Best in a press release at the time. ‘Although all three companies carry catastrophic reinsurance protection, it is premature to assess the total insured impact of the hurricane. A.M. Best remains concerned with the elevated probable maximum loss and the ability of all three companies to absorb a subsequent catastrophic event.’

In that 16 September press release, Best said it would ‘continue to closely monitor the impact that Hurricane Ivan will have on the financial strength of these companies, along with any necessary management actions to improve capitalization.’

Thursday’s action pertained only to Cayman General Insurance.

Bryan Murphy, the CEO of Island Heritage, said he was saddened to hear about Cayman General’s downgrading. ‘We never like to see a competitor experience this kind of misfortune,’ he said.

Mr. Murphy said his company has been in close contact with AM Best since the Hurricane. ‘We took the view to give them whatever they wanted,’ he said. ‘I think we’ve kept them well informed.’

In the end, Mr. Scott said he feels confident that Cayman General will be vindicated.

‘Our list of re-insurers is over-subscribed again, so as far as they’re concerned, we’re still the same Cayman General.’

When the requested figures are prepared and sent to AM Best, Mr. Scott said he thinks Cayman General might even get a higher rating than it had before based on the way it has handled the Hurricane Ivan claims.