OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings of “a-” (Excellent) of R.V.I. Guaranty Co., Ltd. (RVI Guaranty) (Bermuda) and its subsidiary, R.V.I. America Insurance Company (RVI America) (Delaware) (collectively known as RVI). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect RVI’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
RVI’s risk-adjusted capitalization level, high credit quality investment portfolio, low dependence on reinsurance and adequate liquidity position support AM Best’s balance sheet strength assessment of strongest. AM Best assesses RVI’s risk-adjusted capitalization at the strongest level on base and stress scenarios, as measured by Best’s Capital Adequacy Ratio (BCAR). RVI is affiliated with Group 1001 Insurance Holdings, LLC (Group 1001), and benefits from Group 1001’s expertise in areas such as investment, risk management, liquidity management and business development.
AM Best assesses RVI’s operating performance as adequate. RVI has had stable long-term earnings through a mix of underwriting and investment income. Low loss ratios, high expense ratios and combined ratios below 100% lead to consistent underwriting income. The low loss ratios and high expense ratios are not unexpected for the residual value insurance products in which RVI was concentrated historically. As RVI expands further into traditional property/casualty (P/C) reinsurance business, the loss ratios may rise naturally as the expense ratio falls. In 2023, RVI achieved a combined ratio below 100% while also growing its premium volume. The premium volume growth was driven by RVI’s expansion into traditional P/C reinsurance. Net investment income comprised a significant proportion of overall net income in 2023.
The high product risk associated with RVI’s residual value insurance segments has driven the limited business profile assessment because those segments are correlated highly with the broader macro-economy and subject to a low-frequency and high-severity claims profile. However, certain features of RVI’s residual value insurance business serve as partial mitigants to the product risk: a leading market position, little competition, high client retention rate and geographical spread. In recent years, RVI also has expanded opportunistically into traditional P/C reinsurance that may provide additional beneficial diversification in the future.
AM Best assesses RVI’s ERM as appropriate because the company has a formal ERM process that is commensurate with the size, nature and complexity of its business. In general, the company aligns its risk assessment capability with its risk profile. Management closely monitors the company’s risk profile and adjusts risk management goals to improve its risk exposure. Robust ERM processes will be critical for RVI as it strives to prudently expand into new lines of business.
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