R&Q’s strategic plan to split business poses ‘material’ risk as AM Best reacts

AM Best has placed the ratings of  R&Q Insurance Holdings and a number of its subsidiaries under review with negative implications, citing concerns over its plans to potentially separate its programme management (Accredited) and legacy insurance businesses.

The global specialty insurance company R&Q revealed earlier this month that its management is weighing strategic options to set the business on a “more favourable footing” given the scale and size of legacy and programme divisions.

The ratings agency has placed under review with negative implications the long-term ICR of “bbb-” of R&Q Insurance Holdings (Bermuda), the non-operating holding company of the group. The financial strength rating of A- of Accredited Surety and Casualty Company, Accredited Specialty Insurance Company and Accredited Insurance (Europe). All are wholly owned subsidiaries of R&Q.

AM Best said the credit ratings reflect R&Q’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

But it explained that the rating actions follow the announcement on 4 April 2023, that R&Q is reviewing strategic options to separate its businesses, and that the group is expected to report a material operating loss for 2022.

AM Best said it had previously considered the three Accredited companies to be strategically important to the R&Q group and will now review the impact of the likely separation on their rating fundamentals.

Furthermore, AM Best said, the expected operating loss for 2022, driven by R&Q’s legacy operations, will likely lead to a material weakening of the group’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR).

“The ratings are expected to remain under review until AM Best has sufficient clarity over the rating fundamentals of the Accredited companies and the R&Q group, subsequent to their likely separation. It is considered probable that in the near future, the Accredited companies will form an independent rating unit, separate from R&Q,” the agency said.

Did you get value from this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.