Preferred Contractors Insurance Company Risk Retention Group, LLC Downgraded by A.M. Best

From marketwatch.com: OLDWICK, N.J., Jul 25, 2014 (BUSINESS WIRE) — A.M. Best has downgraded the financial strength rating to B (Fair) from B+ (Good) and the issuer credit rating to “bb” from “bbb-” for Preferred Contractors Insurance Company Risk Retention Group, LLC (PCIC) (Billings, MT). The outlook for both ratings has been revised to negative from stable. If this report effects your policy or your certificate of insurance requirements, please visit LiveRate® for Contractor Insurance for other price rate comparisons with many providers of contractor insurance coverage. The ratings reflects Preferred Contractors deteriorating risk-adjusted capitalization and uncertainty surrounding its volatile operating performance given the multiple and significant changes in reinsurance arrangements in recent years. These concerns are amplified by the sizable adverse loss-reserve development recorded during 2013 on prior accident years, sizable growth since 2011 and relatively weak management controls. The negative outlook on the ratings reflects A.M. Best’s concerns regarding the adequacy of the company’s loss reserves, relatively weak capitalization and uncertainty over future underwriting and operating results. (read more) Compare Preferred Contractors Insurance Company Programs with Other...

What is a Contractor Risk Retention Group?

Definition of Contractor RRG A Contractor Risk Retention Group is a self-insurance plan – or group captive insurer – operating under the auspices of the Risk Retention Act (RRA) of 1986 that can cover all the liability exposures – other than workers compensation exposures, of its owners. Contractor RRG companies allow members who engage in construction activities to write liability insurance for all or any portion of the exposures of group members, excluding first party coverages, such as property, worker’s compensation and personal lines, such as home, auto and recreational vehicles. Authorization under the federal statute allows a group to be chartered in one state, but able to engage in the business of insurance in all states – subject to certain specific and limited restrictions. The Federal Act preempts state law in many significant ways, therefore RRGs are not subject to the individual state laws that would otherwise prohibit the formation of group captives or make it difficult to form or operate them. Contractor Risk Retention Group Advantages: Avoid state filing and licensing requirements Membership controls risk and litigation issues Elimination of market residuals No expense for fronting fees Un-bundling of services Exemption from countersignature laws for agents and brokers Stabilize coverage and rates Contractor Risk Retention Group Disadvantages: Risks are limited to only liability insurance Not permitted to write non-related business No guaranty fund availability for members for claims May not comply with certificate requirement or financial responsibility laws While the Exchange was promulgated as a Lloyd s-type facility, what has evolved is a group of individual underwriting syndicates, utilizing the authorities earned by the Exchange, to provide capacity in a wide variety of programs or niche underwriting....