AM Best Revises Canopius Outlooks To Negative

January 15, 2023

AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of A- [Excellent] and the Long-Term Issuer Credit Ratings of “a-” [Excellent] of Canopius US Insurance, Inc. [Canopius US] [Wilmington, DE] and Canopius Reinsurance Limited [Canopius Re] [Bermuda]. Both entities are wholly owned subsidiaries of Canopius Group Limited [Canopius] [Jersey], the non-operating holding company of the Canopius group of companies.

A statement from the ratings agency said, “The Credit Ratings [ratings] reflect Canopius’ balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

“The ratings of Canopius US and Canopius Re reflect their strategic importance to and integration within the Canopius group.

“The revision of the outlooks to negative from stable reflects pressures on Canopius’ balance sheet strength assessment. The group’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio [BCAR], decreased to the strong level from the very strong level as at year-end 2021 and is expected to have remained at the strong level through 2022. Although Canopius’ risk-adjusted capitalisation is expected to improve significantly in the near term, which would alleviate the negative pressure on the ratings, a negative rating action is likely if this does not occur.

“Canopius’ underwriting results showed a moderate recovery in 2021, after underperformance during the period 2017-2020. AM Best expects the group to report a further improvement in underwriting performance for 2022, although overall results will likely be impacted adversely by unrealised fair value losses on fixed income investments. Prospectively, AM Best expects operating performance under the new leadership team to continue to benefit from actions taken to reduce exposure to natural catastrophe events, a strong rating environment and from better yields on the group’s investment portfolio due to the higher interest rate environment.

“Canopius has a well-established business profile as a [re]insurer in the Lloyd’s market, although it is subject to a strong level of competition. The group benefits from its partnership with Samsung Fire & Marine Insurance Co., Ltd., since 2019, which supports the group’s operations and growth in the U.S. and Asia-Pacific markets.”

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