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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