Ride share giant Uber’s Hawaiian captive insurer will reinsure substantially all of Bermuda-based James River Group Holdings Ltd’s legacy portfolio of commercial auto policies related to Uber’s ride-sharing business.

Two principal operating subsidiaries of the James River Group have agreed a loss portfolio transfer reinsurance transaction with Uber Technologies Inc’s wholly owned captive, Aleka Insurance Inc.

The move prompted AM Best to revise the ratings outlook for the James River Group.

Under the terms of the transaction, James River ceded to Aleka approximately $345.1 million of commercial auto liabilities relating to business written for Uber’s ride-sharing business in the years 2013-2019.

James River said that the coverage being provided by Aleka is fully collateralised and not subject to an aggregate limit.

The company said that it will recognise an after-tax loss associated with the loss portfolio transfer of approximately $23.5 million during the third quarter of this year. The loss is largely from claims-handling costs incurred in connection with the transaction.

The transaction was effective from July 1 and closed upon signing. It has received all necessary regulatory approvals, the company said.

As part of the transaction, the two James River subsidiaries and Aleka have entered into an administrative services agreement with Helmsman Management Services LLC for certain claims management services.

Helmsman will assume responsibility for claims handling of the reinsured commercial auto policies for the remaining life of those claims after a transition period, the company said.

Frank D’Orazio, chief executive officer of James River, said: “While we are confident in our carried reserves for this portfolio, the transaction brings economic finality to substantially all of our commercial auto run-off portfolio, effectively insulating the portfolio from further potential reserve development.

“This decisive step enables James River to focus firmly on the future and continue to build on the progress we have made in advancing our core businesses and risk-management practices. We are pleased to be working with a long-term insured partner in Uber to pursue our stated goals.”

News of the loss portfolio transfer agreement prompted the ratings agency AM Best to revise the outlooks to stable from negative and affirm the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings of a- (Excellent) of the rated operating subsidiaries of James River Group.

In addition, AM Best has revised the outlook to stable from negative and affirmed the Long-Term ICR of bbb- (Good) of the Bermuda-based parent company.

AM Best said that the ratings reflect the group’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and marginal enterprise risk management.

AM Best said: “The revision of the outlooks to stable reflect the additional protection afforded to the group’s balance sheet strength following the implementation of a loss portfolio transfer effective July 1, 2021, on the commercial auto lines, which have had recurring adverse reserve development in recent quarters.

“AM Best feels that the protection provided by the LPT reduces uncertainty as the contract significantly mitigates the potential for ongoing adverse reserve development while providing stability in reserves and consistent risk-adjusted capital composition.”

The subsidiary companies are James River Insurance Company, James River Casualty Company, Falls Lake National Insurance Company, Stonewood Insurance Company, Falls Lake Fire and Casualty Company, JRG Reinsurance Company Ltd, and Carolina Re Ltd.

James River Group Holdings Ltd is a Bermuda-based insurance holding company that owns and operates a group of specialty insurance and reinsurance companies.

The company operates in three specialty property-casualty insurance and reinsurance segments: excess and surplus lines, specialty admitted insurance and casualty reinsurance.