Meadowbrook to issue policies under State National after rating downgradePosted On: Aug. 5, 2013 12:00 AM CST
Meadowbrook Insurance Group Inc. said it will replace some of its insurance policies with paper provided by State National Insurance Co. after A.M. Best Co. downgraded Meadowbrook's rating to B++ (stable) on Friday.
In a statement Monday, Southfield, Mich.-based Meadowbrook said its agreement with Bedford, Texas-based State National, effective immediately, will allow Meadowbrook to issue new policies under State National's A (excellent) rating
The arrangement would apply to Meadowbrook's surplus lines business and specialty programs, such as those for excess workers compensation policyholders, Meadowbrook President and CEO Robert S. Cubbin said in a telephone interview with Business Insurance.
Meadowbrook will cancel and rewrite some existing policies when necessary or issue new policies at renewal time, “whichever is important to the agent and the customer,” Mr. Cubbin said.
Some policyholders, such as those bidding for government contracts, may require A-rated paper, although not all Meadowbrook customers require an A-rated policy.
Meadowbrook announced that it worked last weekend to resolve the challenge, following A.M. Best's downgrade.
“Over the weekend, we had substantive discussions with a number of our insurance and reinsurance company partners, regarding the need for an A-rated policy issuer to support a portion of our business,” Mr. Cubbin said in the statement. “We were able to reach an agreement with State National to meet our immediate needs. We are grateful to the State National team for working through the weekend with us to put this agreement in place and to implement a solution so quickly.”
A.M. Best downgraded Meadowbrook and its subsidiaries from an A- (excellent) financial strength rating last week. The Oldwick, N.J.-based rating agency had placed Meadowbrook under review with negative implications in October after the brokerage announced that its third quarter 2012 results would be adversely impacted by an increase in its net ultimate loss estimates for 2011 and prior accident years.
In Monday's statement, Meadowbrook said it plans to “examine expense reduction initiatives” and update its earnings guidance through 2014 based on the A.M. Best rating.
“Our current expectation is that the changes in circumstances since our earnings release on ... July 30 will modestly lower our previously disclosed earnings guidance for the third and fourth quarters of 2013,” the statement reads.