A.M. Best Co. has downgraded the financial strength rating to D
(Poor) from C++ (Marginal) and issuer credit rating to "c" from "b" of Gramercy
Insurance Company (GIC) (Dallas, TX). The outlook for both ratings
is negative. Concurrently, A.M. Best has withdrawn the ratings as GIC
has requested to no longer participate in A.M. Best's interactive rating
The rating actions reflect the worsening of GIC's already weak
capitalization through the third quarter of 2012, driven by ongoing
underwriting and operating losses. As a result, policyholders' surplus
has declined by 73%, which has driven underwriting leverage to very high
levels. The heavy underwriting losses were partially due to an
additional $3.7 million of adverse loss reserve development during 212,
primarily on the 2011 and pre-2010 accident years. The ratings also
reflect GIC's elevated dependence on reinsurance to support its
The outlook reflects A.M. Best's view that GIC may cease operations in
the near term due to lack of capital support.
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. Key criteria utilized include: "Risk
Management and the Rating Process for Insurance Companies" and
"Understanding BCAR for Property/Casualty Insurers". Best's Credit
Rating Methodology can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS
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