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A.M. Best Affirms Ratings of The Farm Credit System Association Captive Insurance Company.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and issuer credit rating of "a+" of The Farm Credit System Association Captive Insurance Company (FCSAC) (Greenwood Village, CO). The outlook for both ratings is stable.

The ratings reflect FCSAC's excellent capitalization, profitable operating results, strong liquidity measures and conservative operating strategy. FCSAC is an association captive dedicated to serving the Farm Credit System (Farm Credit) community. The company's strong return measures are due to profitable underwriting results and generally consistent levels of investment income.

Partially offsetting these positive rating factors are FCSAC's concentrated business risks as an insurer to a homogeneous population and its exposure to weather-related events. Nonetheless, to date, FCSAC has not suffered significant weather-related losses.

FCSAC has a favorable market niche as all Farm Credit members receive their insurance through the captive. The subscribers to the captive are the Farm Credit banks and associations, which are part of the Farm Credit System established by Congress in 1916 to provide American agriculture with a dependable and dedicated source of credit. Subscribers also include The Farm Credit Council and these related service organizations: Federal Farm Credit Banks Funding Corporation, Farm Credit Leasing and Financial Partners.

Although FCSAC has no excess of loss reinsurance protection, members are required to carry excess coverage. This coverage is placed through the FCSAC's attorney-in-fact, ensuring that members have purchased appropriate reinsurance protection. Furthermore, FCSAC has an aggregate excess of loss policy, which limits its losses on a calendar year basis. FCSAC has introduced a number of new products over the past 10 years that could potentially alter its loss experience going forward. A.M. Best anticipates continued strong net income performance from FCSAC but remains concerned that a confluence of factors could lead to a decline in its performance and profitability.

FCSAC's ratings are well positioned to sustain its current financial strength, and consequently, the stable outlook. As a result, upward movement is unlikely over the near term. Alternatively, downward rating pressure could occur if the captive's risk-adjusted capitalization materially deteriorates or there is a downward trend in its underwriting or operating profitability.

A.M. Best remains the leading rating agency of captive insurers rating a wide variety of more than 200 captives in the United States and throughout the world.

For current Best's Credit Ratings and independent data on the captive and alternative insurance market, please visit

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: "Risk Management and the Rating Process for Insurance Companies"; "Understanding BCAR for Property/Casualty Insurers"; and "Catastrophe Analysis in A.M. Best Ratings." Best's Credit Rating Methodology can be found at

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit

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Publication:Business Wire
Date:Jun 5, 2012
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