AM Best Removes From Under Review With Negative Implications and Affirms Credit Ratings of Oxford Insurance Companies’ Members

AM Best has removed from under review with negative implications and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a” (Excellent) of the members of Oxford Insurance Companies (Oxford). The outlook assigned to these Credit Ratings (ratings) is stable. See below for a detailed listing of members and ratings.

The ratings reflect Oxford’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The stable outlooks reflect AM Best's expectation that the companies will continue to generate strong operating results and maintain very strong balance sheet strength assessment across its respective cells. The active cells remain very strongly capitalized individually and collectively with strong operations. AM Best will continue to monitor Oxford's unified pool for unexpected deviations in risk appetite and tolerance.

The removal of the under review with negative implications status considers actions taken by Oxford management over the past six months to reduce dramatically Oxford’s exposure to business related to the issuance of judgement preservation/ financial guarantee policies and the corresponding capital risk charges related to this business as of year-end 2024. Aside from this one-time misstep, Oxford's ERM is considered appropriate and is supported by its long-standing track record of exceptional underwriting results and profitability going back to its origins.

In 2024, Oxford's ratings were placed under review with negative implications based on the change in Oxford’s business mix and limits profile that began in late 2022, as the organization began writing large limit, multi-year financial guarantee policies which was a deviation from its original business profile which is focused on small limits for hard-to-place coverages offered to small to medium enterprises (SMEs). As this book of financial guarantee policies grew, it became a larger part of the risk pool from a policy limits perspective and became difficult to model (in terms of tail risk) in measuring risk-based capitalization. The policies are multi-year bank loan guarantees for law firms engaging in litigation finance. In addition, these high coverage limits expose(d) the organization to higher-than-expected loss outcomes that AM Best viewed as excessive relative to Oxford’s risk-based capitalization. It also put into question Oxford’s ERM and decision-making process.

Over the past year or so, management responded by effectively exiting all business directly related to judgement preservation / financial guarantee activities. In 2024, Oxford established a new Class 2 insurer domiciled in Bermuda that it used to facilitate the novation and transfer of all existing financial guarantee business from the unified pool into the new Bermuda insurer. The new Bermuda cell platform received its license in November 2024, at which time all of the policies were novated to the new insurer as of year-end 2024. This solution enabled Oxford to move the entire book of about 20 policies with approximately $1.3 billion limits out of the unified pool while retaining only $170 million (required by the Bermuda Monetary Authority) as a reinsurance policy to the new organization. To date, there have been no losses in the book; collateral is valued regularly and maintained 4-8x policy limits.

Negative rating action could occur if AM Best's perception of Oxford’s ERM changes due to delays or inaccuracies in quarterly reporting or if unexpected deviation in risk appetite and tolerance misaligned with corporate governance re-emerges. Negative rating action could also occur if Oxford fails to maintain appropriate risk-adjusted capitalization across its active cells in accordance with AM Best's rating methodology.

The FSR of A (Excellent) and the Long-Term ICRs of “a” (Excellent) have been removed from under review with negative implications and affirmed with a stable outlook assigned for the following members of Oxford Insurance Companies:

• Oxford Insurance Company LLC
• Oxford Insurance Company TN LLC
• Oxford Insurance Company NC LLC
• Oxford Insurance Company MT LLC
• First Community Bankers Insurance Company, LLC

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings 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 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.

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

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