AM Best has downgraded the Financial Strength Rating to B+ (Good) from B++ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) to 'bbb-' (Good) from 'bbb' (Good) of Kingstone Insurance Company (KICO) (Kingston, NY).

Concurrently, AM Best has downgraded the Long-Term ICR to 'bb-' (Fair) from 'bb' (Fair) and its associated securities for Kingstone Companies Inc. (KINS) (Delaware), the insurance holding company of KICO. The outlook of these Credit Ratings (ratings) was revised to stable from negative. (See below for a detailed listing of Long-Term Issue Credit Ratings (Long-Term IR) and Indicative Credit Ratings).

The ratings of KICO reflect its balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).

The ratings downgrade is driven by a revision of KICO's operating performance assessment to adequate from strong that reflects volatility in underwriting results in recent years, caused by weather-related losses and loss reserve strengthening. While management has implemented a series of initiatives such as rate increases, exiting of commercial lines and modernizing product, technology and processes all designed to improve future operating performance, the degree of demonstrated volatility in performance is no longer indicative of the previous strong assessment.

KICO maintains an adequate level of risk-adjusted capitalization, which is heavily influenced by high gross catastrophe leverage that is reduced to a moderate level net of reinsurance for lower return periods, but is elevated further on the tail. The company's risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR), showed modest improvement at year-end 2020 and year-to-date 2021, driven by lower growth in direct premium written but the company's geographic concentration and net retention levels in severe event scenarios remain a rating concern. Management has taken a number of strategic initiatives to control its coastal exposures by utilizing catastrophe modeling software to measure and control average annual loss on individual risks, implementation of deductibles and more granular risk scoring metrics.

The following Long-Term ICR has been downgraded with the outlook revised to stable from negative for Kingstone Companies Inc.:

to 'bb-' (Fair) from 'bb' (Fair) on $30.0 million 5.5% senior unsecured notes, due 2022

The following indicative Long-Term IRs has been downgraded with the outlook revised to stable from negative for Kingstone Companies Inc.:

to 'bb-' (Fair) from 'bb' (Fair) on senior unsecured notes

to 'b+' (Marginal) from 'bb-' (Fair) on subordinated notes

This press release relates to Credit Ratings that have been published on AM Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best's Credit Ratings, Best's Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best's Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.

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