AM Best revises outlook for James River Group

AM Best, a global credit rating agency, has revised the outlook for James River Group Holdings Ltd (JRG Holdings) and most of its subsidiaries. It has also downgraded the credit ratings of JRG Reinsurance Company (JRG Re).

AM Best has changed JRG Holdings as well as its rated operating subsidiaries’ (James River Insurance Company, James River Casualty Company, Falls Lake National Insurance Company, Stonewood Insurance Company, Falls Lake Fire and Casualty Company, and Carolina Re, Ltd.) financial strength rating (FSR), long-term issuer credit ratings (Long-Term ICR) to negative from stable and affirmed.

JRG Re also saw its FSR and Long-Term ICR downgraded with its credit rating under review with negative implications.

The ratings incurred by the JRG Holdings’ subsidiaries reflect their balance sheet strength as well as its adequate operating performance, neutral business profile, and marginal enterprise risk management (ERM), it was stated.

The changes follow the firm’s recent announcements about an identified material weakness in its internal control over financial reporting. The board will be considering options such as a potential sale, merger, or other strategic action.

AM Best’s negative outlook reflects the uncertainty that was brought by the announcement as well as the execution risk that comes with some of the initiatives.

As for JRG Re, the ratings given by AM Best reflect the company’s balance sheet strength as well as its marginal operating performance, limited business profile, and marginal ERM. The ratings also benefited from the lift brought by operational and past financial support from JRG Holdings.

AM Best viewed that the firm was less integral to JRG Holdings’ objectives in terms of strategy, operation, and finances, which was supported by the management’s decision to suspend the underwriting business in JRG Re earlier this year after garnering operating losses in the past few quarters.