James River legacy reinsurance deal – how did it affect its credit ratings?

James River legacy reinsurance deal – how did it affect its credit ratings? | Insurance Business America

Reinsurance

James River legacy reinsurance deal – how did it affect its credit ratings?

Deal to provide $160 million of adverse development reinsurance coverage

Reinsurance

By
Kenneth Araullo

AM Best has commented that the credit ratings of James River Group Holdings, Ltd and its subsidiaries remain unchanged after its principal operating subsidiaries entered into a reinsurance agreement with State National Insurance Company, Inc.

The agreement, which combines a loss portfolio transfer and adverse development cover, was executed on July 2, 2024, and is effective from January 1, 2024.

As part of the deal, State National will provide $160 million of adverse development reinsurance coverage for James River Group Holdings’ excess and surplus lines segment casualty portfolio for accident years 2010-2023, with 15% co-participation by the company.

The reinsurance agreement excludes coverage for James River’s former large commercial auto book, most of which is already subject to a prior loss portfolio transfer. James River will retain claims management.

The agreement includes a profit commission of 50% for any favorable development on the business ceded to State National below 104.5% of carried reserves, capped at $87 million.

James River CEO Frank D’Orazio said the transaction aligns with the company’s strategy of de-risking while enhancing financial stability.

The agreement will lead to a $52.2 million reduction in pre-tax income for the third quarter of 2024 due to the excess consideration paid over reserves ceded.

Earlier this year, AM Best updated its outlook on several subsidiaries of James River Group, revising it to negative from stable. These rating adjustments were in the midst of JRG Holdings’ troubled plans to sell off its reinsurance subsidiary, JRG Re, to Fleming Intermediate Holdings.

It was not until April that the transaction was finalized, with a New York court mandating Fleming to proceed with the acquisition.

Elsewhere, the group also appointed Christine LaSala to its board of directors as an independent, non-executive member.

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