AM Best Affirms Credit Ratings Of Arch Capital

December 6, 2020

AM Best has affirmed the Financial Strength Rating of A+ [Superior] and the Long-Term Issuer Credit Rating of “aa-” of Arch Reinsurance Ltd.  [Bermuda] and its strategic affiliates.

Concurrently, AM Best has affirmed the Long-Term ICR of “a-” and the Long-Term Issue Credit Ratings [Long-Term IRs] of Arch Capital Group Ltd. [Arch Capital] [Bermuda] [NASDAQ: ACGL], the ultimate holding company; Arch Capital Group [US] Inc [Delaware]; and Arch Capital Finance LLC [Delaware]. [See below for a detailed listing of the companies and ratings.] The outlook of these Credit Ratings [ratings] is stable.

The ratings agency said, “The ratings of Arch reflect the group’s balance sheet strength, which AM Best categorizes as strongest, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management.

“The ratings are based on Arch’s historically strong operating performance, as well as its balance sheet strength, as measured by Best’s Capital Adequacy Ratio, and strong management team. Arch continues to perform favorably on most operating metrics while maintaining a strong risk-adjusted capital position, despite a significant Stressed Ultimate Loss, as calculated according to AM Best’s ‘Evaluating Mortgage Insurance’ criteria procedure, and low risk-adjusted investment market returns. Arch has demonstrated that it will actively manage the [re]insurance cycles.

“The stable outlooks reflect AM Best’s expectations that the group’s strongest level of balance sheet strength will continue to be supported by strong and stable operating performance, favorable reserve development, diverse business profile and well-defined ERM program.

“AM Best also recognizes that the mortgage insurance business relies heavily on financial models that can vary from actual results. AM Best utilized a conservative stress scenario for Arch’s mortgage insurance book of business when calculating stress-tested risk-adjusted capitalization. Mortgage insurance products have a relatively long exposure period when compared with most of Arch’s current property/casualty insurance and reinsurance products, which can be characterized as medium tail on average. AM Best considered long-term sources of liquidity in the evaluation of these potential tail risk events.”

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