A.M. Best Removes Ratings of Canopius US Insurance, Inc. From Under Review; Assigns Stable Outlook

  A.M. Best Removes Ratings of Canopius US Insurance, Inc. From Under Review;
  Assigns Stable Outlook

Business Wire

OLDWICK, N.J. -- May 16, 2014

A.M. Best has removed from under review with developing implications and
affirmed the financial strength rating of A- (Excellent) and issuer credit
rating of “a-” of Canopius US Insurance, Inc. (Canopius US) (Wilmington, DE).
The outlook assigned to both ratings is stable.

The rating actions follow the completion of the acquisition on May 1, 2014 of
Canopius US’ parent, Canopius Group Limited (Canopius) (Guersney), by Sompo
Japan Insurance Inc. (Sompo Japan), a subsidiary of NKSJ Holdings Inc. and 
one of the largest insurers in Japan.

These ratings are based upon A.M. Best’s criteria “Rating Members of Insurance
Groups” and take into consideration the expected implicit and explicit support
that Canopius US could receive as a member of a much larger and stronger
group. While the exact role and strategic importance that Canopius US will
have is still to be fully determined, A.M. Best expects that this acquisition
should further strengthen Sompo Japan’s U.S. business footprint going forward.
Further details regarding the new organization’s management, new business
initiatives, governance, reinsurance and other forms of capital support
including capital management plans will be key factors that can influence
these ratings positively or negatively in the future.

These rating actions also consider Canopius US’ historically favorable
attritional loss experience (prior to 2013), solid level of risk-adjusted
capitalization and the benefits from additional actuarial and catastrophe
modeling support through Canopius. Offsetting these positive rating factors
are the inherent challenges associated with Canopius US being a predominant
binding facility writer, its sub-par earnings performance in 2013 due to
adverse development in its liability book of business and its history of heavy
overhead expenses under previous ownership, which impeded earnings through its
earlier years of operation.

Positive rating actions could occur if Canopius US records an operating profit
and receives full implicit and explicit support from Sompo Japan, including
committing to using Canopius US as its primary surplus lines delivery
platform. Negative rating actions could occur if there is a significant
decline in the company’s risk-adjusted capitalization and/or any wavering of
implicit and explicit support by Sompo Japan, including the cessation of new
business writing at Canopius US.

The methodology used in determining these ratings is Best’s Credit Rating
Methodology, which provides a comprehensive explanation of A.M. Best’s rating
process and highlights the different rating criteria employed in the rating
process. Best’s Credit Rating Methodology can be found at
www.ambest.com/ratings/methodology.

A.M. Best Company is the world’s oldest and most authoritative insurance
rating and information source. For more information, visit www.ambest.com.

       Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

Contact:

A.M. Best
Kenneth Monahan, 908-439-2200, ext. 5342
Financial Analyst
kenneth.monahan@ambest.com
or
Henry Witmer, 908-439-2200, ext. 5097
Assistant Vice President
henry.witmer@ambest.com
or
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
rachelle.morrow@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com
 
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