AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating (FSR) of B+ (Good) and the Long-Term ICR of “bbb-” (Good) of Star Mutual Risk Retention Group, Inc. (Star Mutual) (Knoxville, TN).

The Credit Ratings (ratings) reflect Star Mutual’s balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

The negative outlook reflects concerns regarding pressure on Star Mutual’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), due to the company’s rapid growth trajectory, which has significantly exceeded projections. Premium volume grew by over 150% in 2024, significantly outpacing surplus growth, driven largely by rapid expansion in policies in force and entry into new jurisdictions. While this growth has enhanced the company’s market presence, it has also strained capital adequacy in the near term, raising concerns about the management of growth within its volume of risk insured and risk tolerance. Forward-looking projections indicate improvement, but AM Best believes execution risk remains elevated.

In recent years, Star Mutual has continually strengthened its underwriting framework through the development of additional rating factors aimed at mitigating high-risk drivers and operators. These enhancements, along with increased visibility from the company’s AM Best rating and expanded operating geography, have allowed Star Mutual to attract more diverse and preferred risks. The company continues to utilize and integrate additional enhancements to its proprietary underwriting platform that supports its risk mitigation strategy. AM Best acknowledges Star Mutual’s efforts to further improve its overall risk selection and portfolio quality; however, the effectiveness of these controls will continue to be evaluated as the company scales further.

Negative rating actions may occur in the near term if there is deterioration in balance sheet strength metrics such that they no longer support the current assessment. Negative rating actions may also occur if unexpected or material variances from projections persist. Although unlikely, positive rating actions could occur if surplus growth exceeds growth in premiums to better support the book of business and results in an improvement in overall balance sheet strength metrics.

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.

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