AM Best has assigned a Financial Strength Rating of A- (Excellent) and Long-Term Issuer Credit Rating of “a-” (Excellent) of Sustainable Assurance Company (SAC) (South Burlington, VT). The company is a wholly owned captive subsidiary of Lancaster County Solid Waste Management Authority (LCSWMA) (Lancaster, PA). The outlook assigned to these Credit Ratings (ratings) is stable.

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

The stable outlooks consider AM Best's expectation that SAC’s balance sheet strength assessment fundamentals will continue to strengthen over the medium term, with internal profit generation and retention levels that support continued growth in the company’s surplus, generated from strong operating performance.

SAC’s balance sheet strength assessment is underpinned by its risk-adjusted capitalization, which is at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR) across all return periods in standard scenarios. However, the captive has a relatively high retention to surplus ratio, which challenges its risk-based capitalization in a stressed scenario. AM Best’s view of SAC’s probable maximum loss (PML) is based on the captive’s offered limits, which readily exceed historical loss experience in SAC’s offered lines. The ratings benefit from the inherent benefits of implicit support and financial flexibility from a fiscally sound parent, as part of the organization’s comprehensive and historically successful enterprise risk management from which the captive emanated, partially as an alternative to the hard commercial insurance market. LCSWMA is a Pennsylvania municipal authority, recognized nationally for leadership in the solid waste industry. SAC’s risk-adjusted capitalization is expected to remain at the strongest level, supported by increased retention of earnings. SAC has a conservative investment portfolio with conservative loss reserving strategies.

SAC’s operating performance reflects actuarially needed premium for its coverage offerings of property and terrorism insurance. Though SAC is a newly formed company (2020), LCSWMA has experience with both offered lines since the mid-1980s. Historically, SAC has had minimal losses dating to its legacy experience at the parent level and offers a portion of the coverage of these low frequency, high severity loss type lines from the captive for efficiency. The favorable legacy experience of LCSWMA in the offered coverage lines is fully reflected in management’s projected underwriting results.

SAC's business profile is assessed as limited, reflecting its position as a single-parent captive of LCSWMA with product concentration in its property and terrorism offerings and geographic concentration of exposures concentrated in central Pennsylvania.

Positive rating action could occur if the company’s balance sheet strength assessment improves, driven through its ability to organically grow surplus from profitable operations in line with management’s projections. Conversely, negative rating action could occur if the balance sheet assessment weakens, reflecting higher-than-expected severity losses or a more aggressive stance in capital management. Negative rating action could also occur if AM Best's perception of the parent's ability and willingness to support the captive weakens.

AM 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.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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