A.M. Best has affirmed the financial strength rating of A+
(Superior) and the issuer credit rating of "aa" of Seaworthy
Insurance Company (Seaworthy) (Annapolis, MD). The outlook for both
ratings is stable.
The ratings reflect Seaworthy's strong capitalization, management's
specialty niche expertise and the implicit and explicit financial
support provided by the ultimate parent, Berkshire Hathaway Inc.
(Berkshire), and a Berkshire subsidiary in the form of significant
reinsurance transactions and capital contributions.
The ratings also take into consideration the increased reinsurance
protection provided by National Indemnity Company (NICO) (Omaha,
NE), as well as the reinsurance previously provided by NICO via 50% loss
portfolio transfer and 50% quota share reinsurance, which were provided
at the time of Berkshire's acquisition of Seaworthy and its parent, Boat
America Corporation, in August 2007. A separate 80% quota share
agreement on all super yacht program business went into effect October
1, 2011. At December 31, 2012, the loss portfolio agreement was
increased to 75%, and effective January 1, 2013, the quota share was
increased to 75%. Efective June 1, 2013, Seaworthy entered into a
reinsurance agreement with NICO, whereby NICO assumes 100% of named
windstorm losses. In addition to Berkshire's track record of supporting
its member companies, these transactions demonstrate the explicit
commitment provided by Berkshire.
These positive rating factors are partially offset by Seaworthy's
product and revenue concentration and the risks associated with the
expansion beyond the business generated from members of the Boat Owners
Association of The United States. Seaworthy also is challenged by the
prevailing low interest rate environment and its emphasis in highly
liquid, low credit risk assets comprised mostly of cash and equities.
Negative rating actions could occur if Seaworthy's capitalization and/or
operating performance falls markedly short of A.M. Best's expectations
as a result of significant deterioration in loss trends, and any sudden
change in parental commitment. Given Seaworthy's limited business scope,
the ratings also are subject to any sudden shifts within its core market
niche, a drastic change in its business profile and any sudden and
unforeseen disruption in its distribution.
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.
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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