AM Best Downgrades Credit Ratings of New York Schools Insurance Reciprocal

OLDWICK, N.J.--(BUSINESS WIRE)--
AM Best has downgraded the Financial Strength Rating to A-(Excellent) from A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “a-” (Excellent) from “a” (Excellent) of New York Schools Insurance Reciprocal (NYSIR) (Uniondale, NY). The outlook of these Credit Ratings (ratings) has been revised to negative from stable.

The ratings reflect NYSIR’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The rating downgrades reflect the reduction in the NYSIR’s balance sheet strength assessment to very strong from strongest. NYSIR experienced a significant decrease in risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), primarily due to reserve strengthening in 2022 on older-year claims. NYSIR had a significant increase in ultimate loss estimates due to a change in the reciprocal’s actuary. The unfavorable loss emergence experienced was primarily driven by mis-estimations in loss costs related to New York’s Child Victims Act of 2019 claims, as well as a change in actuarial analysis assumptions for the general liability line of business. As a result, NYSIR’s operating performance metrics deteriorated due to the reduction in surplus in 2022, resulting in a significant increases in its underwriting and operating ratios.

In addition to reserve strengthening in 2022, operating performance metrics were impacted by high loss emergence due to the clearing of a backlog of claims driven by COVID-19 court closures and delays, increased property losses and the impact of social inflation on liability claim costs.

The negative outlooks reflect AM Best’s concern surrounding the company’s ERM. The potential for continued reserve strengthening on NYSIR’s older-year claims and the size of the reserve charge taken in 2022 raise questions as to risk awareness and the appropriateness of the reciprocal’s reserving and claims management practices, as well as loss-cost assumptions when setting pricing. While NYSIR has been a market leader in risk management and safety protocols related to school risks in New York for more than 33 years, it remains to be seen if mitigation initiatives in place will return operating performance to historical results.

As a leading insurer of public schools in New York since 1989, NYSIR benefits from its leading market position, strong subscriber retention and sponsorships by statewide education associations. NYSIR issues property, general liability, automobile liability and physical damage, school board legal liability and excess catastrophe liability policies to school districts across 50 New York counties. As an insurance reciprocal, NYSIR’s mission is to help subscribers provide a safe environment for students, staff and visitors, and to assist in protecting their physical assets. Due to high geographic concentration and segment risk, the reciprocal has been impacted by recent social and political events, which exposes NYSIR to significant regulatory risk due to changes in legislation.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2023 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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Anthony Molinaro
Senior Financial Analyst

+1 908 882 2129

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Christopher Sharkey
Associate Director, Public Relations

+1 908 882 2310

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Vicky Riggs
Associate Director

+1 908 882 2273

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Al Slavin
Senior Public Relations Specialist

+1 908 882 2318

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Source: AM Best