KBRA has downgraded the insurance financial strength rating (IFSR) of Kingstone Insurance Company to BBB+ from A-, and issuer rating and the long-term credit rating of the senior unsecured notes of KICO’s publicly-traded parent, Kingstone Companies, Inc. to BB+ from BBB-.

The outlooks have been revised to Negative from Stable.

Subsequently, KBRA withdraws all ratings for Kingstone Insurance Company and Kingstone Companies, Inc.

KBRA noted that the ratings reflect Kingstone’s sound investment income, favourable distribution network, local market knowledge, and adequate capitalization.

At the same time, Kingstone’s 2021 results were problematic due to catastrophe losses, most notably the remnants of Hurricane Ida. Major initiatives have been executed to improve profitability, the most notable being its withdrawal from commercial lines and rate increases on homeowners’ business.

Moreover, Kingstone has curtailed writing in certain areas, implemented individual catastrophe risk scoring tools, and mandated that all eligible homeowners’ policies have hurricane deductibles. However, operating losses have continued into 2022.

Furthermore, KBRA stated that balancing these strengths are the company’s geographic risk concentration, reliance on reinsurance, higher expenses, and the potential for unfavourable loss reserve development.

Kingstone’s premiums and exposures remain concentrated in Suffolk, Nassau, and Kings Counties in New York, an area that is susceptible to severe weather events. As the most significant risk to the organization is catastrophe events, primarily hurricanes and nor’easters, the company relies upon its reinsurance to provide adequate limits to prevent material erosion of its capital position.

In addition, Kingstone has also recently made significant investments in technology, employee hiring & training, and professional services that should greatly benefit the company over time, but will also increase expenses in the near-term.

Lastly, KBRA notes that the holding company maintains a moderate level of debt, with year-end 2021 debt-to-total capital of 28.3%. However, ordinary dividend capacity at Kingstone has been dampened in recent years resulting in reduced liquidity to cover interest expense.