AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Arrow Mutual Liability Insurance Company (Arrow) (Chestnut Hill, MA).

The Credit Ratings (ratings) reflect Arrow’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 (ERM).

The revision of the outlooks to negative from stable reflects AM Best’s concern with the Arrow’s downward trend in operating performance over the recent term. This trend, which also has put pressure on the company’s surplus, is driven by a large claim dispute with a reinsurer, as well as elevated expenses. The company is implementing mitigating measures and fully reflected the anticipated cost of the disputed claim in its 2023 annual statement.

Arrow’s balance sheet strength assessment is supported by its strongest level risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), at year-end 2023, and liquidity metrics that compare favorably with the industry. Arrow’s BCAR has remained at the strongest level despite the surplus decline in recent years.

The limited business profile assessment reflects Arrow’s small customer base, high concentration of clients in its home state of Massachusetts, as well as potential regulatory risks from said concentration.

Arrow’s ERM assessment remains adequate given the company’s small size and the scale at which it operates. Due to the limited number of employees, Arrow works with a number of third parties to round out its operations.

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.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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