OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Hagerty Reinsurance Limited (Hagerty Re) (Hamilton, Bermuda). The outlook of these Credit Ratings (ratings) is stable. Concurrently, AM Best has assigned an FSR of A- (Excellent) and a Long-Term ICR of “a-” (Excellent) to Drivers Edge Insurance Company (Drivers Edge) (Littleton, CO). The outlook assigned to these ratings is stable. Hagerty Re and Drivers Edge are both wholly owned subsidiaries of Hagerty Insurance Holdings Inc.
The ratings reflect Hagerty Re’s balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The strong balance sheet assessment reflects Hagerty Re’s strong level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). Additionally, the assessment is supported by Hagerty Re’s historical reserve adequacy, with favorable development and redundancies in most years, as well as favorable liquidity, financial flexibility and a conservative investment portfolio. Risk-adjusted capitalization has improved through 2024, and this trend is expected to continue over the next several years.
Drivers Edge benefits from a 100% quota share agreement with Hagerty Re, common ownership, and the assignment of Hagerty Re’s MGA to generate business, though underwriting operations have not yet commenced.
AM Best views Hagerty Re’s operating performance as strong, with combined ratios consistently below personal auto peer averages, providing the company with ample operating income year over year. The company’s underwriting profitability is driven partially by Hagerty Re’s underwriting and valuation expertise, superior claims handling ability, with a vast network of collector vehicle repair experts, a special investigation unit to deter fraudulent activity, and on-staff parts finders. The company’s underwriting performance drives the majority of its net income, as Hagerty Re’s investment allocation was allocated entirely to low-yielding cash investments at year-end 2023. Hagerty Re benefited from the more favorable yields on fixed-income and cash investments in 2023 and diversified its investment holdings in 2024 to continue to drive higher investment yields into future years.
AM Best views Hagerty Re’s business profile as neutral. Though the company is essentially a mono-line niche writer with a relatively small share of a larger market, Hagerty Re has dominant name recognition within the enthusiast vehicle space. Additionally, Hagerty Re partners with the world’s largest auto insurers, reducing competition within their market. These large primary insurers work with the company due to its unique expertise and data advantage in the space, which relies heavily on partnerships with specialty auto shops and their ability to source replacement parts.
AM Best assesses Hagerty Re’s ERM as appropriate for its size and scope. The company monitors and manages its operating risks through its management processes, stress testing scenarios, and robust risk mitigation plans to reduce losses when catastrophe activity is expected to occur. Hagerty Re’s reinsurance utilization is modest, but strategic, to create capital efficiency.
The outlook of these ratings is stable; it is AM Best’s expectation that Hagerty Re will continue to grow capital organically through favorable underwriting results, as well as continued favorable investment income, to meet the capital demands of its growing book of business and maintain a strong level of risk-adjusted capitalization.
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