A.M. Best has affirmed the financial strength rating of A-
(Excellent) and the issuer credit rating of "a-" of National Guaranty
Insurance Company of Vermont (NGIC) (Burlington, VT). The outlook
for both ratings is stable.
The ratings of NGIC reflect its excellent risk-adjusted capitalization,
operating performance and liquidity positions, as well as its
sophisticated risk management strategy and practices, conservative
investment strategy, its management team's extended experience in the
industry and its parent's, Waste Management, Inc. (WM),
Partially offsetting these positive rating factors is that a large
percentage of NGIC's surplus is loaned back to WM, which is supported by
a 24-hour demand note. However, capital levels at NGIC are monitored by
the state, and the company must maintain a certain aggregate exposure to
capital ratio as prescribed by the Vermont Department of Financial
NGIC was incorporated on April 29, 1989, is licensed in Florida and
operates as a surplus lines carrier in several other states. In total,
NGIC is currently providing financial assurance coverage in 18 states
and issuing surety bonds in 24.
As a pure captive established to meet the financial assurance
obligations of WM, under Subtitle D of the Resource Conservation and
Recovery Act, NGIC's financial strength is closely tied to the financial
position of WM. The coverages written apply to landfills owned and/or
operated by subsidiaries of WM (WM-owned landfills), and assure that as
of the date of closure, there will be sufficient funds to pay for proper
closure and post-closure activities, such as "caping" and monitoring of
the site. The reserves for these coverages are maintained on the
parent's balance sheet. WM's ability to adhere to its strict operating
guidelines, including reserve adequacy, ensures that NGIC has minimal
exposure to losses.
A.M. Best views the management and corporate strategy as strengthening
to the ratings, given NGIC's conservative underwriting, operational
goals and transparency. A.M. Best views NGIC's enterprise risk
management practices as strong given the impact on the conservative risk
culture, defined risk controls and its capital and surplus. Other
factors A.M. Best considered in the ratings process include, but are not
limited to, the geographical diversification, as well as the support and
commitment of WM to NGIC as well as NGIC's mission.
A.M. Best expects NGIC's future operating performance to be stable, and
a strong and stable earnings profile should provide further support to
control its growth and business writings, which are consistent with its
capital and surplus position.
NGIC's ratings are not expected to be upgraded within the next 12-24
months as its operating performance and capital position already have
been considered in the ratings process. The ratings could be downgraded
if NGIC's Best's Capital Adequacy Ratio (BCAR) score declines, its
operating performance and risk profile deteriorates, insured losses
deplete capital, significant changes and turnover occur in its
management team and/or risk management controls and tolerances or WM's
financial condition deteriorates.
A.M. Best remains the leading rating agency of alternative risk transfer
entities, with more than 200 such vehicles rated in the United States
and throughout the world. For current Best's Credit Ratings and
independent data on the captive and alternative risk transfer insurance
market, please visit www.ambest.com/captive.
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.
Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS
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