AM Best Assigns PCA To Fortium Insurance
AM Best has assigned a Preliminary Credit Assessment [PCA] to Fortium Insurance Company Ltd. [Fortium] [Bermuda] with a Financial Strength Assessment of A- pca [Excellent] and a Long-Term Issuer Credit Assessment of “a-” pca [Excellent]. The outlook assigned to the PCA is stable.
The ratings agency said, “The PCA reflects Fortium’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management [ERM].
“The PCA also reflects AM Best’s assessment that, based on Fortium’s business plan, the company will maintain a balance sheet strength assessment of very strong supported by projected risk-adjusted capitalization at the strongest level through the five-year initial forecast period, as measured by Best’s Capital Adequacy Ratio [BCAR]. An initial capital contribution of approximately $110 million in 2026 and retained earnings through the forecast period are expected to support premium growth, which is anticipated to be significant in the company’s initial years. As the company plans to cede all its premiums, credit risk related to reinsurance recoverables is expected to be material. This is expected to be partially mitigated through use of highly rated or fully collateralized counterparties. The company’s investment risk is expected to be low given the relatively conservative investment portfolio, which will support stability in future balance sheet metrics.
“The adequate operating performance assessment and the limited business profile assessment are based on Fortium’s business plan as presented to AM Best. This plan includes significant premium growth in the first years of operation with improving operating profitability that supports the adequate operating performance assessment. The company outlines a business plan of short-tailed specialty business, which is expected to be somewhat diversified by business line and geography. Fortium’s management has experience within the specialty lines business market. However, the limited business profile assessment considers the execution risk faced by start-up organizations and recognizes the challenges associated with gaining market acceptance within the specialty space, while remaining profitable. Fortium has established an ERM structure and this structure is expected to evolve as the business matures.”
