AM Best revises outlook to stable for New York schools insurance reciprocity

OLDWICK, NJ–(BUSINESS WIRE)–AM Best revised the outlook from negative to stable and affirmed New York Schools’ financial strength rating of A (Excellent) and issuer long-term credit rating (long-term ICR) of “a” (Excellent) Insurance Reciprocal (NYSIR) (Uniondale, NY).

Credit ratings (ratings) reflect NYSIR’s balance sheet strength, which AM Best rates as the strongest, as well as adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM) .

NYSIR’s outlook has been revised to stable to negative due to the intangible financial impact of the expected reciprocal of the New York Child Victims Act of 2019 and the stabilization of operational performance following of management actions, including coverage changes, rate increases, and non-renewal of underperforming districts. In addition, NYSIR entered into an adverse development hedge treaty, signed a new management contract with Wright Risk Management (WRM), among other initiatives that AM Best expects to maintain NYSIR’s operating performance within the range. adequate.

The affirmation of the long-term ICR reflects the change in the assessment of NYSIR’s trading profile from neutral to limited. NYSIR faced potential challenges from the Child Victims Act, which expired in August 2021, and had minimal impact on the reciprocal’s financial results. NYSIR continues to be the premier insurer of New York’s public schools, benefiting from its market-leading position, strong subscriber loyalty, exclusive partnerships with statewide educational associations and the strong support from its school communities. NYSIR benefits from its product diversification and 33-year partnership with WRM, which performs many reciprocal processes. Although the inverse offers multiple lines of coverage, the positive attributes of the inverse are partially offset by the inverse’s single state concentration in New York and concentration in the school segment, which can create other headwinds for the reverse.

NYSIR’s operational performance rating was changed to adequate from strong. Despite stabilizing over the past few years, the reverse has seen some deterioration and volatility in earnings over the past five-year period, which has led to the change in NYSIR’s operational performance assessment. Overall results were impacted by several losses related to property catastrophes and significant liability losses, as well as a cautious reserve for uncertainties surrounding pending claims under the Children’s Act casualties, social inflation and rising costs of losses in New York. NYSIR’s overall earnings were supported by investment gains on its conservative investment portfolio, which should continue to support adequate reciprocal operating performance and long-term member-focused goals.

AM Best evaluates NYSIR’s ERM program, if applicable. NYSIR’s ERM program is designed specifically for schools and the challenges its members may face. Management continues to proactively respond to changes in regulatory, judicial and legislative challenges in New York. AM Best expects the reciprocal’s risk management program to continue to support the reciprocal’s business profile and operational performance.

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