Vault’s E&S platform downgraded following sale announcement

AM Best has responded to the announced sale of Vault Holdings to a private equity consortium led by Cornell Capital by downgrading its E&S platform and placing its reciprocal exchange under review with developing implications.

Cornell yesterday announced the deal for the high net worth (HNW) specialist with support from existing investor Hudson Structured Capital Management (HSCM).

Asset manager HSCM was a founder of Vault alongside its main sponsor Allied World, which will retain a 10 percent stake in the St Petersburg, Florida-based business.

The consortium will buy Vault’s E&S carrier platform that is currently owned by Allied World and Fairfax Financial, in addition to its other operations.

Vault was created in 2017 with $100mn of capital by Allied World and HSCM to address the fast-growing HNW homeowners market with a structure that included a reciprocal insurance exchange, an MGA and E&S carrier.

AM Best today placed under review with developing implications Vault Reciprocal Exchange’s financial strength rating of A- (Excellent) and long-term issuer credit rating of “a-”. The ratings will remain under review until the transaction closes and AM Best evaluates the post-transaction details.

The ratings agency also downgraded Vault E&S Insurance Company’s financial strength rating to A- (Excellent) from A (Excellent) and credit ratings to “a-” from “a”. These ratings have been placed under review with developing implications.

“The ratings have been downgraded and placed under review as Vault E&S is no longer considered a strategic investment to its current ultimate parent, Allied World Assurance Company Holdings,” AM Best explained.

The ratings agency said that management has communicated detailed plans regarding the expected reinsurance structure and capitalisation of Vault to be implemented when the transaction closes, which is anticipated to occur in the first quarter of 2021.

“The plans are expected to improve Vault’s quality of capital, financial leverage and capital flexibility, absent Allied World’s majority ownership. The ratings will remain under review until the transaction has closed and AM Best has evaluated the post-transaction details,” it added.

Since initially writing business in Florida, Vault has expanded into several states including South Carolina, New Jersey, Connecticut and Pennsylvania.

“The company remains relatively new and continues to expand prudently in accordance with its strategic plan,” AM Best commented.

Vault was co-founded by then Allied World CEO Scott Carmilani and former AIG Private Client president Charles Williamson (pictured).

Carmilani is leaving his current role at the carrier’s parent Fairfax Financial to concentrate his efforts on the HNW specialist as its executive chairman. Williamson will continue as Vault CEO, with the remaining management team also staying on.