AM Best Upgrades Credit Ratings of Echelon Insurance

AM Best has upgraded the Financial Strength Rating to A- (Excellent) from B++ (Good) and the Long-Term Issuer Credit Rating to “a-” (Excellent) from “bbb+” (Good) of Echelon Insurance (Echelon) (Mississauga, Ontario). The outlook of these Credit ratings (ratings) has been revised to stable from positive.

The ratings reflect Echelon’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

Echelon’s strong balance sheet strength assessment is underpinned by the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), which has continued to improve and stabilize since being acquired by its parent, CAA Club Group (CCG). Total equity has increased in each of the last five years, supported by strong organic earnings and capital contributions from CCG. Capital relief resulting from the amalgamation with Orion Travel Insurance (Orion), a CCG subsidiary, has also strengthened the company’s overall capital base. Further benefitting the balance sheet is Echelon’s improved reserve development trends, marked by two consecutive years of favorable prior-year reserve development. Although the company’s historical reserve development has exhibited volatility, this was primarily driven by losses in the Ontario Specialty automobile line of business during accident years not covered by quota share reinsurance. Since implementing quota share reinsurance on this portfolio in 2020, Echelon has been successful in preserving and reinforcing its capital position.

Since 2020, the substantial improvement in Echelon’s operating performance has been driven by management’s strategic shift toward targeting profitable commercial lines of business. The company continues to improve the diversification of its product portfolio by deepening its commercial focus, responding to growing market demands and reducing exposure to the volatile Ontario Specialty automobile line of business. Complementing this strategy is the addition of Orion through its operations in the travel insurance segment, which features short-tail claims and provides added diversification.

Echelon was founded in 1998 and became a member of CCG in 2019. As a leading Canadian Specialty insurer, the company works closely with broker partners to provide personal and commercial insurance solutions to protect Canadian families and businesses. CCG is a not-for-profit organization that offers emergency roadside assistance, travel and insurance services to over 6.5 million Canadians.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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