December 11, 2022
  • December 11, 2022

AM Best downgrades Tower Hill Prime Insurance Company credit ratings

By on April 14, 2022 0

OLDWICK, NJ–(BUSINESS WIRE)–AM Best downgraded the financial strength rating (FSR) to B+ (good) from B++ (good) and the issuer’s long-term credit rating (long-term ICR) to “bbb-” (good) from “bbb” (maid) of Tower Hill Prime Insurance Company (Tower Hill Prime) (Gainesville, FL). The outlook for these credit ratings (ratings) is negative.

The ratings reflect Tower Hill Prime’s balance sheet strength, which AM Best assesses as adequate, as well as its marginal operating performance, limited business profile and appropriate management of business risks.

Tower Hill Prime’s long-term ICR downgrade reflects further erosion of surpluses and continued difficulty in growing surpluses organically through operations and continued difficulties in establishing adequate reserves. The reserves, which continue to evolve unfavorably, are influenced in part by the generalized social inflation induced by the increase in litigation in the territory of operation of the company. In addition, Tower Hill Prime, as is typically the case with Florida property insurers and their exposure to risk, has high gross underwriting leverage reflecting its reinsurance programs. The company’s reliance on reinsurance adds another layer of concern amid the tightening reinsurance market. Combined with the aforementioned issues, the high financial leverage of the holding company, Tower Hill Holdings, Inc. caused AM Best’s view of the holding company to be revised from negative to neutral, adding downside pressure.

Tower Hill Prime’s cumulative capital position has declined due to reported underwriting losses in each of the past five years, despite capital contributions from the holding company. In response to recent pressures, Tower Hill Prime has reassessed its risk appetite and implemented plans to exit its personal lines segment in Florida, as this business will be renewed in Tower Hill Insurance Exchange effective September 1, 2022. AM Best expects Prime’s exit from this segment to generate a significant reduction in cumulative exposure and probable maximum losses, as well as reduce demonstrated volatility in operating results.

The negative outlook reflects AM Best’s concerns about the effectiveness of current risk mitigation strategies with respect to Tower Hill Prime’s ERM valuation and the execution risk associated with exiting the volatile personal lines segment in Florida. Tower Hill Prime plans to not roll over approximately 50% of its Florida personal lines business by the end of 2022 and to exit the segment entirely by 2023. Florida personal line policies will be transferred to Tower Hill Insurance Exchange, a separate entity from Tower Hill. Prime created specifically to house this volatile segment. Additionally, the negative outlook reflects pressure on the company’s operating performance, with the severity of recent results not matching AM Best’s marginal valuation. Tower Hill Prime faces several challenges ranging from severe hurricanes, more frequent weather events, and social inflation.

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 relevant disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Assessment Activity Web page. For more information on the use and limitations of credit rating opinions, please see Best Credit Score Guide. For more information on the proper use of Best’s Credit Ratings, Best’s Performance Ratings, Best’s Preliminary Credit Ratings, and AM Best’s press releases, please see Guide to Proper Use of Best’s Ratings and Reviews.

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 more than 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit

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