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Best places Church Mutual Insurance under review


Rating agency A.M. Best Co. Inc. on Friday placed the financial strength rating of Merrill, Wisconsin-based Church Mutual Insurance Co. and its subsidiaries under review for a possible downgrade due to concerns over capital erosion related to weather and liability losses.

Church Mutual currently has an A (excellent) financial strength rating from Best.

The review follows material erosion in surplus and risk-adjusted capital at the insurer as measured by Best’s capital adequacy ratio.

“Surplus erosion was primarily a function of significant adverse loss reserve development related to weather losses, liability losses and defense costs,” particularly as litigation development and social inflation impacted results, the Oldwick, New Jersey-based rating agency said in a statement.

Church Mutual’s performance was also affected by current accident year storm losses and increased loss cost severity amid inflation and supply chain issues, Best said.

“The potential for future adverse loss reserve development remains a rating concern,” Best said.

Church Mutual is pursuing several capital management strategies to improve its capital position, including capital contributions, reinsurance and surplus relief options, and changes to its underwriting profile intended to reduce exposure.

“In the absence of sufficient anticipated improvement and execution on said plans, the ratings will likely be downgraded,” Best said.

The review applies to Church Mutual Insurance Co. and units CM Regent Insurance Co. and CM Vantage Specialty Insurance Co. — collectively referred to as Church Mutual Insurance Group.