AM Best Rating Withdrawal for Agrinational Raises Concerns for Captive Insurers

In "The Implications of AM Best Withdrawing Agrinational's Credit Ratings for Captive Insurance and Parent Company Support Models," Marcus Lee reported that AM Best has withdrawn Agrinational Insurance Company's Financial Strength Rating of A- (Excellent) and Long-Term Issuer Credit Rating of "a-" (Excellent). According to the article, the Vermont-based captive insurance company, owned by Archer Daniels Midland Company (ADM), left AM Best's interactive rating process, which, under the agency's rules, results in a loss of ratings. 

Per the author, while the withdrawal was triggered by that policy, the loss of ratings may still make securing reinsurance or partnering with third parties more difficult—particularly in markets wary of unrated captive insurers. Mr. Lee noted that AM Best had previously placed a negative outlook on Agrinational due to underwriting volatility and property losses. 

According to the article, the situation highlights how closely parent-backed captives are tied to the financial health of their parent companies. When a parent's credit profile comes under pressure, the captive's perceived stability can also be affected. 

Mr. Lee wrote that regulators are also taking a closer look at capitalization and independence for captives, especially those writing higher-risk business. The National Association of Insurance Commissioners (NAIC) and international regulators have been increasing oversight in these areas. 

Per the author, investors and market participants should not dismiss the withdrawal of a captive's rating as a routine matter. Mr. Lee suggested that companies using a mix of captive insurance, traditional insurance, and reinsurance may be better equipped to manage risk if challenges arise. 

The article concludes that the Agrinational case is a reminder for parent-backed captives to maintain strong governance, sufficient capital, and diversified strategies to remain resilient under changing market and regulatory conditions.