AM Best Removes From Under Review With Negative Implications and Affirms Credit Ratings of Members of Vault Insurance Group

OLDWICK, NJ–(BUSINESS WIRE)–am the best was removed from review with adverse impact and affirmed a Financial Strength Rating of A- (Excellent) and Long-Term Issuer Credit Rating of “a-” (Excellent) from Vault E&S Insurance Company (Little Rock, AR) and Vault Reciprocal Exchange (St. Petersburg, FL), collectively referred to as Vault Insurance Group (Vault). The outlook associated with these credit ratings (ratings) is negative.

The ratings reflect Vault’s balance sheet strength, which AM Best rates as very strong, as well as the company’s reasonable operating performance, limited business profile and adequate risk management. The ratings were placed for adverse impact review in April 2022 due to a material deterioration in Best’s risk-adjusted capitalization as measured by its capital adequacy ratio (BCAR) coupled with significant volatility in operating performance.

Vault reported significant capital erosion during the last nine months of 2021, impacted by significant weather damage (e.g. Hurricane Ida), large liability losses and reserve strengthening. Full year results were also impacted by winter storm damage in Uri and one-time charges related to the divestiture of Allied World Assurance Company Holdings, Ltd. influenced. After negative impact ratings were reviewed, management implemented effective capital management initiatives that returned risk-adjusted capitalization to the strongest level as measured by BCAR. These actions included a $35 million capital contribution in the form of a surplus note for reciprocal exchange and the purchase of increased catastrophe reinsurance coverage at the June renewal. The overall balance sheet strength assessment also reflects claims reserve development, which was favorable in the first six months of 2022, writing leverage positions currently comparable to composite averages, and a conservative investment portfolio.

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The negative outlook reflects continued operational volatility, which has resulted in consistent underwriting and operating losses before tax on a statutory and adjusted basis since inception. The adjusted basis includes the benefit of earned membership fees from reciprocal exchanges, which are not treated as a premium in statutory accounting. The forecasts take into account the impact of the recently introduced reinsurance program. While the reinsurance program is expected to reduce the severity of losses, underlying challenges remain, which management is addressing through several corrective actions. The impact of these actions is monitored in relation to the underlying outcomes. Vault is also expected to effectively manage anticipated growth in risk accumulation, the impact of current weather patterns, and financial performance.

The group continues to rapidly expand its geographic footprint with typefaces in numerous states. The expansion of approved and non-approved products has ensured significant premium growth in recent years. The group continues to focus on personal property, with Florida being the best state at the moment. Management is expected to continue to enrich its enterprise risk management program as it expands into new territories, relying on prudent practices to appropriately account for the risks associated with its growing portfolio.

This press release relates to ratings published on AM Best’s website. All ratings information relating to the press release and relevant disclosures, including details of the issuing authority for each rating referenced in this press release, can be found at AM Best Last review activity site. Learn more about the use and limitations of the credit score Opinions, please see Best Credit Ratings Guide. Information on the proper use of Best’s credit ratings, Best’s performance ratings, Best’s preliminary credit ratings and AM Best press releases can be found here Guide to Proper Use of Best’s Ratings & Assessments.

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

Copyright © 2022 by AM Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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