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AM Best has downgraded the Financial Strength Rating to C+ (Marginal) from B- (Fair) and the Long-Term Issuer Credit Rating to “b-” from “bb-” of Echelon Property & Casualty Insurance Co. (Echelon), based in Chicago. The ratings outlook is negative.

Founded in 2004, Echelon operates as an admitted insurer and is a multi-line, multi-state carrier. EPC writes personal and commercial insurance products in Illinois, Indiana, Arizona and Missouri, according to information on its website.

AM Best said Echelon’s ratings reflect its balance sheet strength, which the ratings firm categorizes as very weak, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management.

The downgrade of the ratings follows a deterioration in balance sheet strength in the third quarter of 2020 and a change in AM Best’s assessment from weak to very weak.

While the company received a capital infusion from its parent – Guardian Insurance Group – in the second quarter of this year, which favorably impacted overall capitalization, operating losses and an increase in non-admitted assets in the third quarter of 2020 eroded policyholder surplus.

Premium volume declined as a result of the COVID-19 pandemic, caused by a decrease in demand in the commercial auto program, Echelon’s primary line of business. Subsequently, the company has stopped writing commercial auto in Illinois in an effort to improve profitability.

While the parent continues to support the company with the aforementioned capital contribution and on-going operational support, AM Best expects Echelon’s results to remain volatile, which will continue to place pressure on balance sheet strength.

Source: AM Best

Topics Property Property Casualty Casualty