AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of a- (Excellent) of Bermuda-based RVI Guaranty Co Ltd and its Connecticut-domiciled subsidiary, RVI America Insurance Company.

The outlook of these credit ratings is stable.

The ratings reflect RVI’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

RVI’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio, is currently at the strongest level.

The agency said that RVI was acquired in May last year by RVI Acquisition Holdings LLC, a newly formed Delaware limited liability company, and became affiliated with Group1001.

Group 1001 is an insurance holding company.

AM Best said that it now has access to the expertise resident in the broader family associated with Group1001, which could help in its risk management and business development.

The company’s strongest BCAR level, increased financial flexibility, high-credit-quality investment portfolio and adequate liquidity position support AM Best’s balance sheet assessment of very strong.

RVI’s operating performance is assessed as adequate. The company has stable long-term earnings along with low historical loss and combined ratios.

The agency said that RVI has five-year average earnings of $7.9 million, which includes its first net loss in 2017 since its incorporation in 1989, and a five-year average combined ratio of 79 per cent.

The company’s performance turned positive in 2018 and it has had stable earnings of approximately $10 million each year since.

After two years of decline in net premiums written, the agency said RVI’s NPW increased approximately 20 per cent in 2020. This premium rise was primarily from the commercial real estate and the commercial equipment lines despite the negative Covid-19 impact to the aviation industry.

In the first half of this year, the company experienced a large uptick in passenger vehicle line premium, mainly because of the development of its China PV reinsurance business, AM Best said.

RVI’s limited business profile assessment is driven by its narrow line of business and high product risk. The company typically has low-frequency, high-severity claims.

Despite the company’s leading market position and little competition in the residual value insurance sector, AM Best said, its product risk is highly correlated with the broader economic performance and cycles.

RVI’s premium concentration is high. However, this is offset partially by its high client-retention rate. The company continues to expand its client base and develop business opportunities in China, the agency said.

AM Best said that RVI’s overall ERM assessment is appropriate as the company has a formal ERM process that is commensurate with the size, nature and complexity of its business.

The company’s risk-assessment capability is aligned, in general, with its risk profile. Management closely monitors its risk profile and adjusts risk-management goals to improve its risk exposure.