September 26, 2024 by matray

AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICRs) of “a” (Excellent) of Medical Professional Mutual Insurance Co. and its rating unit members, collectively known as Coverys Companies. (See below for a detailed list of these subsidiaries and Credit Ratings.)

The ratings reflect Coverys’ balance sheet strength, which AM Best assesses as strongest, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management.

The negative outlooks reflect pressure on Coverys’ balance sheet strength assessment from increased volatility in loss and loss adjustment expense reserves as the group continues to report modest adverse reserve development in the past few years, which is a clear departure from an earlier practice of more conservative reserving with consistently favorable reserve development. As of year-end 2023, accident years 2016-2019 continued to develop adversely, partially offset by large reserve releases in 2021-2022, which may be premature given the long-tailed nature of the medical professional liability (MPL) line of business. Due to the increased volatility of reserves, the assessment of the group’s balance sheet strength, while still at the strongest level currently, could be lowered potentially.

AM Best assesses Coverys’ operating performance as marginal, as its underwriting and return metrics lag its MPL peers and the broader property/casualty industry. In the past few years, the group’s calendar-year underwriting results showed some improvement from comprehensive operational overhauls by the new management team. However, due to the long-tailed nature of the MPL line and the more recent weakening of reserve strength, AM Best will have more confidence in these results when the years mature.

Negative rating action could occur if adverse reserve development materially impacts earnings and/or future capital formation. Negative rating action also could occur if the group’s risk-adjusted capitalization were to weaken materially, which could result from significant deterioration of operating performance, an increase in claims frequency or severity, or from adverse reserve development.

While unlikely in the near term, the ratings may be positively affected through sustained improvement in underwriting and overall operating performance providing support for the Coverys’ strongest level of balance sheet strength.

The FSR of A (Excellent) and the Long-Term ICRs of “a” (Excellent) have been affirmed with the outlooks revised to negative from stable for the following members of the Coverys Companies rating unit:

• Medical Professional Mutual Insurance Company


• ProSelect Insurance Company


• Preferred Professional Insurance Company


• Coverys Specialty Insurance Company


• Coverys Risk Retention Group, Inc.


• Coverys Limited


• Coverys International Insurance Company Designated Activity Company