KBRA Assigns Rating to Apex Star Reciprocal Exchange and Affirms Rating for Star Vantage Reciprocal Exchange

KBRA assigns a BBB Insurance Financial Strength Rating (IFSR) to Apex Star Reciprocal Exchange ("Apex Star") and affirms the BBB IFSR for Star Vantage Reciprocal Exchange ("Star Vantage"). The Outlook for both ratings is Stable.

Star Vantage is a recently formed Mississippi domestic reciprocal property and casualty insurance which writes personal lines and commercial lines business on an admitted basis in Mississippi and on a surplus lines basis in other states. Apex Star is a new Florida domestic reciprocal property and casualty insurance company which also writes personal lines and commercial lines business, being on an admitted basis in Florida and a surplus lines basis in other states. Both companies are headquartered in Florida.

Key Credit Considerations

The ratings reflect both companies’ low underwriting leverage and significant surplus relative to projected premiums written. The ratings also reflect a favorable market opportunity in the Southeast property market. The management team has solid insurance industry experience and writes highly customizable policies which it views as a competitive advantage. Additionally, as recently formed start-up insurers, Star Vantage and Apex Star have no legacy liabilities. Both companies have minimal start-up expenses due to an organizational structure whereby the Attorney-in-Fact (AIF) incurs the majority of start-up costs.

Balancing these strengths is the company's high financial leverage due to 100% of Apex Star’s surplus base and nearly 100% of Star Vantage’s surplus base consisting of surplus notes. Furthermore, as property writers in the Southeast, both companies will have product and geographic concentration, natural catastrophe exposure due to hurricanes and high reinsurance dependence that, depending on availability and affordability, could materially impact results. Lastly, as de novo insurers, Star Vantage and Apex Star's future profitability is uncertain and dependent upon management executing its business plan.

Rating Sensitivities

A material favorable variance to business plans provided to KBRA including a faster reduction of financial leverage, a consistent trend in organic surplus growth, improved financial flexibility and access to capital and/or a favorable change in risk profile could result in positive rating action.

A material unfavorable variance to business plan provided to KBRA, significant weather events that materially impact earnings and capital, an inability to obtain reinsurance on acceptable terms and pricing, causing an increase in loss exposure, a reduction in the company’s ability to underwrite policies or a drag on earnings, an unfavorable change in risk profile and/or a departure of key members of the management team without suitable replacement could result in negative rating action.

To access ratings and relevant documents, click here.

Click here to view the report.

Methodologies

• Insurance: Insurer & Insurance Holding Company Global Rating Methodology
• ESG Global Rating Methodology

Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

Doc ID: 1010125

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