AM Best has placed the credit ratings of an Arizona-based insurance company under review with developing implications following its agreement with a recently established Bermudian-based reinsurer.

The ratings agency said the financial strength rating of A (Excellent) and the long-term issuer credit rating of “a+” (Excellent) of Scottsdale-based First Guard Insurance Company are under review.

First Guard is a subsidiary of Biglari Holdings Inc.

The agency said the ratings have been placed under review following the approval of a reinsurance agreement submitted to the Arizona Department of Insurance.

The filing establishes a quota share reinsurance agreement with Biglari Reinsurance Ltd, a recently established Bermudian-licensed affiliated reinsurer and a part of the Biglari Insurance Group Inc, which AM Best said is a well-capitalised entity with roughly $395 million in contributed capital from its ultimate parent, Biglari Holdings Inc.

AM Best said: “The under review with developing implications status considers the expected inclusion of First Guard into a new group with a much larger capital base.

“As a result, First Guard will likely be afforded added financial flexibility and improved risk-adjusted capitalisation at the onset of the new relationship.

“The ratings will remain under review with developing implications until AM Best evaluates the new group’s financial strength.”