New MGU plan poses risk to Fidelis’ rating as AM Best reacts

AM Best has placed under review with negative implications the financial strength rating and long-term issuer credit ratings of Richard Brindle-led insurance group  Fidelis following the announcement of its plan to separate its business and create a new managing general underwriter (MGU).

Last week, Fidelis announced its intention to create “one of the largest managing general underwriters globally”, with plans to originate and underwrite over $3 billion of gross written premium across a range of specialty insurance and reinsurance classes of business.

The new entity will be led by most of the current management of Fidelis. In turn, Fidelis will be led by a combination of existing Fidelis executives supplemented by a number of experienced senior executives from outside the organisation.

The ratings agency has expressed concerns that Fidelis’ business profile “may be affected by the separation of key management personnel into a separate legal entity”. As a result, the ratings of Fidelis Insurance Holdings and the members of this rating unit have been placed under review with negative implications.

AM Best plans to continue monitoring the separation, implementation and execution of the new strategy and structure, and resolve the under review status only after the separation is fully executed, which includes appropriate regulatory approvals. The agency will assess, among other things, the market acceptance of the new structure, which it says will be apparent by analysing business volumes and quality.

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