OLDWICK, N.J., November 17, 2022–(BUSINESS WIRE)–AM Best has assigned a Preliminary Credit Assessment (PCA) to Gramercy Indemnity Company (Gramercy) (Uniondale, NY) with a Financial Strength Assessment of A- pca (Excellent) and a Long-Term Issuer Credit Assessment of “a-” pca (Excellent). The outlook assigned to this PCA is stable.
The PCA reflects Gramercy’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
The proposed balance sheet strength assessment is contingent upon the execution of a significant capital contribution that management is currently contemplating, with the goal of optimizing capital efficiency. There are two structures under consideration: 100% cash; and up to 20% subordinated debt, with the remaining balance being cash. Other contributing factors that support the proposed balance sheet strength assessment include the company’s conservative investment portfolio, largely composed of fixed income securities, a comprehensive reinsurance program with a panel of strong participants and its reserving philosophy. With this philosophy, all claims are reserved to reflect the most probable outcome based on investigative and legal information obtained and file development to date, and not on a pattern, factor or average reserve method. Furthermore, through its parent company and owners, there is financial flexibility, and the company could raise additional capital, if warranted.
The proposed operating performance assessment is based primarily on initiatives implemented by management that include a disciplined and proactive approach to underwriting, with the primary objective being the development of specialty premium written in a profitable manner; a marketing and distribution channel designed as a limited distribution strategy for its program business, focusing on a smaller number of broker partners that meet certain stated requirements; and an integrated and disciplined operational model with expertise in the specialty lines of business, all designed to improve future underwriting results. Gramercy’s source of premiums will be derived through New York Contractors’ (NYCON) Program and National Education Program (NEP). The company launched its NYCON program in 2018 with current in-force premium of approximately $49 million. Approximately 90% of the NYCON book of business each year since inception has been made up of providing coverage for HVAC technicians, general contractors, plumbers, electricians and carpenters. The company began due diligence on NEP program in early 2022 with an anticipated launch in the second quarter of 2023. The program will focus its underwriting on public K-12 schools (other than New York), private K-12 schools, charter schools and small colleges and universities with enrollment less than 7,500. Management is anticipated modest premium growth for this program in the early stages of deployment. Currently, the company’s operating return metrics lag the industry measures on a five- and 10-year average basis, primarily due to the startup nature of the company in 2019; however, they are expected to improve premium scales over time.
The proposed business profile assessment is primarily based on Gramercy’s narrow geographic concentration. However, management plans to expand into additional states over the next five years through a phased approach. Gramercy and Gramercy Risk Management are wholly owned subsidiaries of Delaware-based Gramercy Risk Holdings, LLC, which is currently owned in a 50-50 split between Fishlinger Risk Holdings, LLC, and WT Holdings, Inc. Executive management has extensive experience in forming and managing insurance companies in the commercial property/casualty market. Gramercy strives to become of the premier insurers of specialty risk, providing highly valuable products and services to its target markets in a profitable manner.
The proposed ERM assessment is based on Gramercy’s commitment to ERM that is demonstrated by its integration throughout the organization at all levels including the board of directors, board committees and senior management. The ERM committee identifies key metrics that measure risks and reports them to Gramercy’s board of directors; critical operating departments report metrics to the committee on a quarterly basis as well. The committee is composed of nine individuals integrated in the departments that generate critical risks, and through senior management, communicates Gramercy’s business objectives and risk appetites to all employees.
This press release relates to Preliminary Credit Assessments that have been published on AM Best’s website. For all assessment information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual assessments 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 and Assessment opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
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