Velocity Specialty upgraded to A after acquisition by FM

By Michael Loney

May 30 - (The Insurer) - AM Best has upgraded the financial strength rating to A from A-minus of Velocity Specialty Insurance Company following the competition of its acquisition by FM Group this month.

Wilmington, Delaware-based E&S carrier VSIC’s long-term issuer credit rating has also been upgraded to “a” from “a-minus”. All the ratings have a stable outlook.

AM Best had placed the ratings removed under review with developing implications in January after the deal was announced.

FM’s acquisition of VSIC was announced along with Ryan Specialty agreeing a deal to acquire the property cat-focused MGA Velocity Risk Underwriters from private equity sponsor Oaktree Capital Management in a $525 million cash deal.

The removal from under review with developing implications and rating upgrades reflect the completion of VSIC’s acquisition in early May.

“Due to the implicit and explicit support received as a recently acquired entity, as well as the higher ratings and larger capital base of its new parent, a notch of rating enhancement was extended to VSIC’s long-term ICR,” AM Best said.

FM intends to utilise VSIC to add excess and surplus lines capabilities to augment its core business and broaden its reach in the middle market property segment.

In addition, technology and analytical innovations created at VSIC are expected to be integrated into FM’s businesses, AM Best said. The company also benefits from FM participating as a quota share reinsurer on its most recent program.