OLDWICK, N.J. (May 5, 2022) — AM Best has assigned a Financial Strength Rating of A (Excellent) and a Long-Term Issuer Credit Rating of “a” (Excellent) to PURE Specialty Exchange (PSE) (Scottsdale, AZ). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect PSE’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 ratings also consider the implicit and explicit support provided by its affiliate, Tokio Marine Holdings, Inc. and its lead insurance operating company, Tokio Marine & Nichido Fire Insurance Co., Ltd.
The very strong balance sheet assessment reflects PSE’s strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), on a pro forma basis for an expected initial capitalization via surplus notes issued by PSE to Privilege Underwriters, Inc. AM Best expects PSE’s risk-adjusted capitalization to remain within the strongest category with additional positive assessment factors contributing, including financial flexibility, quality of assets and its conservative investment portfolio. Partially offsetting these strengths is PSE’s exposure to catastrophe losses, expected reliance on reinsurance and an initial capital structure that is comprised entirely of surplus notes issued by PSE to Privilege Underwriters, Inc. The reliance on surplus notes is expected to gradually decrease over time due to organic surplus growth via member surplus contributions and operating profitability.
AM Best assesses the company’s operating performance as adequate based on PSE’s projections and the fact that the anticipated writings and associated historical loss ratios are well known to the company. AM Best views the company’s business profile as limited given that PSE is a startup entity and will be geographically concentrated in New York, California, South Carolina, North Carolina and Massachusetts. PSE’s ERM capabilities benefit from overall framework developed at the ultimate parent level.
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