Did you know that recently AM Best improved Canal Insurance’s financial strength rating from a B++ (good) to A- (excellent?)
It has an impact on the long-term insurance rating of Canal Indemnity and Canal Insurance, collectively known as “Canal Group”. The improved rating shows the strength of Canal’s balance sheet. AM Best has determined their sheet and credit rating as stable and stronger in contrast to their previous ones.
In addition to the balance sheet, Canal Insurance Company has strengthened its limited business profile, operating performance, and enterprise risk management. Typically, the upgraded ratings reflect an improvement in operational performance. These took place due to re-underwriting initiatives the management introduced many years ago.
Management is now manifesting these initiatives shown in reported results. The management used to be more conservative in terms of reserving practice and eliminating the past year’s reserves loss development. However, things have changed significantly with their strengthened financial position.
Canal Insurance Company – Business Profile
As described above, the business profile of Canal Insurance Company remains limited as the firm has always been a mono-line commercial automobile insurer. Despite this, the group of companies benefits from a well-organized brand, specialty niche orientation, and long-standing distribution network.
Experts assessed that the company’s balance sheet was at a strong but more volatile risk point. This is because the company had a higher-than-average equity investment.
It is important to keep in mind that although Canal Insurance holds a good reputation with truckers, it has been a long haul. The company is a property provider and underwriter casualty insurance company. It primarily works for the commercial trucking industry.
The offerings of the company include physical damage, cargo, and liability coverage.
It’s worth mentioning that commercial automobile policies make for over 85 percent of total premiums. There is a network of some independent agents that sell the company’s products in 40 states, focusing on Southeast and Southwest.
Reasons Behind Downgrades
The significant loss reserve development of the Canal Group before 2011 reflected downgrades. It led to weak operating returns and increased underwriting losses. In fact, the company experienced significant adverse development on the commercial vehicle loss reserves from 2007 to 2010. The loss reserves were predominantly during car crash years.
The accident year’s results increased competition and weakened macroeconomic conditions. Both factors played a vital role in the decline of the Canal Group.
The Upgrade in Credit Ratings
The recent development in operating returns has increased automobile peer composite for commercial vehicles. The positive credit ratings have partially balanced the risk-adjusted capitalization. It has upgraded not only the operating performance of the company, but also its position in the core commercial trucking segment.
All in all, after getting an improved credit rating, Canal Insurance Company has made an investment in technology to upgrade its operational capacity and product management capabilities.