The most well-known insurance company rating agency, A.M. Best, has downgraded the financial strength rating (FSR) of Tower Group International, Ltd., and its subsidiaries to B++ (Good) from A- (Excellent). All subsidiaries are under review with negative implications. Fitch Ratings has also downgraded Tower Group International, Ltd.’s and Tower’s operating subsidiaries’ Insurer Financial Strength (IFS) ratings to ‘BB’ from ‘A-‘. I, like many insurance agents, recommend not insuring your autos or property with any insurance company having less than an A- AM Best financial strength rating, whenever possible. Most of Tower Group’s subsidiary companies insuring homes & personal use autos & trucks in the USA are not easily identifiable as being a part of Tower Group, so this blog post will inform you about the subsidiaries operating under Tower Group, and how this ratings downgrade impacts them. If you are insured with some of these companies associated with Tower Group, you should shop to see what more financially stable insurance companies can offer you. I’ll show you some major competitors that my be a better choice for you.
Tower Group AM Best Financial Strength Ratings Downgrade
Why was Tower Group downgraded by Fitch & AM Best? Here are excerpts from the AM Best press release:
“These rating actions take into consideration Tower’s most recent announcement, in which management plans to strengthen prior year loss reserves by $365 million, well in excess of the $60 – $110 million initially indicated in its August 8th press release, & take a goodwill impairment charge of $215 million as a result of the reserve actions already taken. These rating actions consider the magnitude of the charges taken & the material adverse impact on Tower’s risk-adjusted capitalization, financial leverage, liquidity and coverage ratios. In addition, the ratings consider the reduced financial flexibility given the delay in earnings, the decline in shareholder confidence and the corresponding decline in share price.
The negative rating implications assigned to Tower reflect the potential for further adverse reserve development, increased competitive challenges and due to the ratings downgrade, potential actions taken by third party reinsurers and lenders. The ratings will remain under review pending further discussions between A.M. Best and Tower’s management. The negative implications reflect the reasonable likelihood that the ratings and/or outlook could be downgraded and/or revised. 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.”
Update 8/29/2014: Tower Group has been downgraded by AM Best again. A.M. Best has downgraded the financial strength rating (FSR) of Tower Group to C (Weak) from C++ (Marginal) spurred by its soaring net losses and uncertainty over whether it can carry its debts through an intended merger with ACP Re.
A.M. Best said its revised ratings takes into consideration the Bermuda insurer and reinsurer’s recent regulatory filing that disclosed nearly $106 million in net losses over the first six months of 2014, plus shareholder’s equity of negative $11 million. The rating downgrades also “reflect the heightened uncertainty around [Tower Group’s| ability to repay its senior debt holders in the event that its pending merger with ACP RE … does not occur on or before Sept. 15, 2014,” A.M. Best said, per this Insurance Journal article.
Which Tower Group subsidiaries insure private passenger vehicles & owner-occupied residential property in the USA? Fortunately, a portion of the subsidiaries sell very little (under one million in annual written auto or home insurance premium in the US for 2012), or sell no home or personal auto insurance. However, it’s possible your home or cars & trucks might be insured with these subsidiary companies: CastlePoint Insurance Company (in NJ & NY only), CastlePoint National Insurance Company, Tower Insurance Company of New York, Tower National Insurance Company, North East Insurance Company, Hermitage Insurance Company, York Insurance Company of Maine (Not to be confused with York Insurance Company, owned by a different parent company), Massachusetts Homeland Insurance Company, & Preserver Insurance Company. Please be aware an insurance group selling home insurance in Florida, called Tower Hill Insurance, is NOT a subsidiary or part of Tower Group International, LTD.
If your home or autos are insured with any of Tower Group companies mentioned in the above paragraph, you would have purchased your policy through an independent insurance agency appointed to represent the company, along with other insurance companies. A good independent insurance agency can be a great choice to buy auto and home insurance, but it’s more likely independent agency customers are aware of being insured with, for example, “Miller Insurance Agency,” instead of the name the company actually insuring them.
How do you find out the name of the insurance company subsidiary insuring you? If you purchased your auto or home insurance policy through an independent insurance agent, the complete name of the insurance company will be on the insurance policy declarations page or insurance id card. This is also true if you buy direct of from a captive agent representing mainly one company. For example, if you know you are insured with Progressive or Allstate, checking your insurance ID card will show you are actually insured with a particular subsidiary, such as Progressive Northern Insurance Company, or Allstate Indemnity Company.
If you are insured with any of the Tower Group subsidiaries, you don’t need to panic. But you should shop around, to see if it makes sense to choose a more financially stable insurance company. On the home page of my website, I have links to reviews of all the major auto & home insurance companies in the USA, which include AM Best ratings, and a link to my page showing the best & worst companies by state. Bookmark my home page, smartshopyourcarinsurance.com, because its the easiest way to find and compare auto & home insurance companies, making shopping for insurance smarter and easier.
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Adirondack Insurance Exchange is one of the top 20 auto & home insurers in New York, and NJ Skylands Insurance insures homes & autos in New Jersey. Neither of these insurance organizations are rated for financial strength by AM Best, and were not included in the Tower Group rating downgrade. Tower Group owns Adirondack AIF, LLC, and New Jersey Skylands Management, LLC. These Adirondack and New Jersey Skylands management companies are the attorneys-in-fact for Adirondack Insurance Exchange, a New York reciprocal insurer, Mountain Valley Indemnity Company, an Adirondack business; and, New Jersey Skylands Insurance Association, a New Jersey reciprocal insurer, and its New Jersey domiciled stock insurance subsidiary, New Jersey Skylands Insurance Company. Tower Group manages these companies, but as reciprocal insurers, their assets are separate from Tower Group. If you are insured with either of these two insurance organizations, and are concerned about the Tower Group ratings downgrade, please contact your insurance company for an explanation of how the ratings downgrade affects you.
What do you think about the Tower Group AM Best ratings downgrade? Does it affect your home or auto insurance? Comment on my facebook page. If you would like my help, you can reach me at help@smartshopyourcarinsurance.com. Follow me on Twitter for important insurance consumer news & new blog entries at CarInsWatch.