Ratings Agency Plans to Test Insurers’ Reserves

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Two insurance companies owned by Malibu billionaire Don Hankey are under review by ratings agency A.M. Best Co., which said it is concerned that the insurers might not have enough reserves to keep pace with their growth.

A.M. Best said late last month that it would review the financial strength of KnightBrook Insurance Co. and Knight Insurance Co., both part of Knight Insurance Group, which is owned by Mid-Wilshire conglomerate Hankey Group.

The agency, which rates insurers much like Moody’s rates borrowers, said in a statement that the two companies might not have large enough reserves based on how much they grew last year. Knight Insurance Group’s revenue was $170 million last year, a 66 percent jump over the previous year.

Eric Jarvis, chief executive of Knight Insurance Group, said the rapid growth coupled with problems at other insurance companies prompted the review.

Knight Insurance Group offers so-called program insurance – not standard home or auto policies, but rather insurance for construction projects, niche businesses and other “oddball stuff,” Jarvis said.

Over the past few months, A.M. Best downgraded three other companies that specialize in program insurance.

“They said, ‘We want to look at you to make sure you’re not going to implode as well,’” Jarvis said.

As for Knight Insurance Group’s growth last year, he said that it has seen more customers for program insurance as other companies have cut down or eliminated those practices.

The review is expected to take about six weeks, wrapping up next month. Jarvis said he and Hankey will go to New Jersey to meet with A.M. Best for a review of Knight Insurance Group’s books. A.M. Best officials declined to comment.

While Jarvis said he’s confident the company will keep its current “A-” rating, the equivalent of “excellent,” a downgrade could be a serious blow. Many insurance brokers will only sell policies from insurers rated “A-” or better.

“Worst-case scenario, they’d downgrade us to ‘B++,’ and that would be a disaster,” he said. “Many producers would be reluctant to sell our product.”

Rodeo Boutique

Boston investment bank Provident Healthcare Partners, a boutique firm that specializes in selling and raising capital for health care businesses, has set up shop in Beverly Hills.

The office, on Wilshire Boulevard near Rodeo Drive, is the firm’s first satellite location.

Justin Hand, a Provident managing director, is running the new office. He said about 20 percent of the firm’s business is already in the Western United States.

Provident has helped sell or raise money for home health care providers, pharmacy suppliers and specialty clinics such as eye-surgery centers and hospices.

Hand said there will continue to be strong demand for those businesses as Americans age.

C-Suite News

Molly Campbell has been appointed to the board of East West Bancorp Inc. of Pasadena. Campbell is deputy executive director of the Port of Los Angeles. … Paul Simmons has joined Hankey Group as president and chief operating officer. He was previously executive vice president at Zions Bancorporation in Salt Lake City. … Hugh Costello has joined downtown L.A. asset manager Aristotle Credit Partners as a managing director. He was previously with investment manager Post Advisory Group in Santa Monica. … Neil Prasad has been named partner in charge of the L.A. office of accounting firm Marcum, overseeing all of the firm’s business lines here. He will remain partner in charge of the firm’s local assurance services group. … Eric Grodan has been named relationship manager at the downtown L.A. office of wealth management firm Abbot Downing, a division of Wells Fargo & Co. that caters to the super rich. He was previously a senior vice president in the local office of Merrill Lynch. …Greg Brubach, David Gill and Manish Patel have joined the L.A. office of accounting firm Ernst & Young. Brubach, a partner, transferred from the firm’s Chicago office. Gill, also a partner, and Patel, a principal, came from London. Ernst & Young also promoted five senior managers in the L.A. office to partner: Hilda Echeverria, Cathy Goonetilleke, Anthony McGrath, Tiffany Switalski and Clay Wilber. … Jon Round has joined Brentwood prepaid debit card issuer Card.com as chief operating officer. Round was previously chief executive of Westlake Village prepaid card issuer Kaiku Finance.

Staff reporter James Rufus Koren can be reached at [email protected] or (323) 549-5225, ext. 225.

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