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A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and issuer credit rating of “a-” of National Guaranty Insurance Company of Vermont (NGIC) (Burlington, VT). The outlook for both ratings is stable.
The ratings of NGIC reflect its excellent risk-adjusted capitalization, operating performance and liquidity position, as well as its sophisticated risk management strategy and practices, conservative investment strategy, its management team’s extended experience in the industry and its parent, Waste Management, Inc.’s (WM) operational controls.
Partially offsetting these positive rating factors is the fact that a large percentage of NGIC’s surplus is loaned back to its parent. The loan back is supported by a 24-hour demand note from WM. However, capital levels at NGIC are monitored by the State, and the company must maintain a certain aggregate exposure to capital ratio as prescribed by the Vermont Department of Financial Regulation.
NGIC was incorporated on April 29, 1989, is licensed in Florida and operates as a surplus lines carrier in several other states. In total, NGIC is currently providing financial assurance coverage in 18 states and issuing surety bonds in 25 states.
As a pure captive established to meet the financial assurance obligations of WM, under Subtitle D of the Resource Conservation and Recovery Act, NGIC’s financial strength is closely tied to the financial position of WM. The coverages written apply to landfills owned and/or operated by subsidiaries of WM (WM-owned landfills), and assure that as of the date of closure, there will be sufficient funds to pay for proper closure and post-closure activities, such as “capping” and monitoring of the site. The reserves for these coverages are maintained on the parent’s balance sheet. WM’s ability to adhere to its strict operating guidelines, including reserve adequacy, ensures that NGIC has minimal exposure to losses.
A.M. Best views the management and corporate strategy as strengthening to the ratings, given NGIC’s conservative underwriting, operational goals and transparency. A.M. Best views NGIC’s enterprise risk management practices as strong given the impact on the conservative risk culture, defined risk controls and its capital and surplus. Other factors A.M. Best considered in the rating process include, but are not limited to, the geographical diversification, the support and commitment of WM and NGIC’s mission.
A.M. Best expects NGIC’s future operating performance to be stable, but strong and the stable earnings profile should further support the company to control its growth and business writings, which are consistent with its capital and surplus position.
NGIC’s ratings are not expected to be upgraded within the next 12-24 months as its operating performance and capital position already have been considered in the ratings process. A.M. Best could downgrade the ratings, if NGIC’s Best’s Capital Adequacy Ratio (BCAR) score declines, its operating performance and risk profile deteriorates, insured losses deplete capital or significant changes and turnover occur in the company’s management team and/or risk management controls and tolerances or WM’s financial condition deteriorates.
A.M. Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated in the United States and throughout the world.
For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: “Alternative Risk Transfer (ART)”; “Risk Management and the Rating Process for Insurance Companies”; and “Understanding Universal BCAR.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
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