OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has downgraded the financial strength rating to B++ (Good) from A- (Excellent) and the issuer credit rating (ICR) to “bbb+” from “a-” of AmerInst Insurance Company, Ltd. (AmerInst) (Bermuda). Concurrently, A.M. Best has downgraded the ICR to “bb+’’ from "bbb-" of AmerInst Insurance Group Ltd. (Bermuda). The outlook for all ratings has been revised to stable from negative. AmerInst is a wholly owned subsidiary of AmerInst Insurance Group Ltd.

The rating downgrades primarily reflect AmerInst's volatile operating results due to a continuing unfavorable underwriting performance through Sept. 30, 2014. AmerInst's unfavorable underwriting performance has been due to its investment in new underwriting facilities focused on providing coverage to small law and accounting firms, and the longer-than-anticipated execution of its business plan forecast over the past three years.

As a result, AmerInst has reported significant underwriting losses in the past five years, which have continued into 2014. AmerInst intends to continue under its newly revised business plan and employ a conservative reserving methodology under which it has historically booked to a higher loss ratio than that of its primary carrier. AmerInst has met A.M. Best's higher capitalization requirements, which mandate a more conservative level of risk-based capital for its newly revised business plan. Although capital is supportive of this business plan, AmerInst continues to generate both underwriting and net losses, as well as demonstrate an under-performance in its premiums written.

Partially offsetting these negative rating factors are AmerInst's strong capitalization, experienced management team and niche expertise in providing professional liability coverage. AmerInst's long-term contractual relationship with Crum and Forster Insurance Company, its partner in underwriting, marketing, and claims, also contributes positively to the ratings.

A.M. Best will closely monitor quarterly performance of AmerInst. Any material negative deviation from the business plan in terms of management, operating profitability, risk profile or decline in its risk-adjusted capitalization could result in negative rating pressure.

Positive rating action may result from AmerInst executing its business plan over the long term, along with consistent positive operating performance with minimal volatility.

Negative rating action may result from the company having larger than expected losses, reduction in its capital or continued underwriting and net losses.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilized:

• Alternative Risk Transfer (ART)
• Analyzing Insurance Holding Company Liquidity
• Evaluating Country Risk
• Rating Members of Insurance Groups
• Risk Management and the Rating Process for Insurance Companies
• Understanding Universal BCAR
• Understanding BCAR for Property/Casualty Insurers

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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