Commercial Auto Market Trends: Hallmark Financial Services Inc. & Subsidiaries Under Review

Commercial Auto
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BY:
Loren Henry

Broker

March 5, 2020

By Loren Henry, Broker
Worldwide Facilities – San Diego, CA

Despite the sector’s size, commercial auto continues to challenge commercial lines insurance underwriting segments due to unfavorable loss severity trends and growing adverse loss reserve development.

The impact of these trends has resulted in many A-rated standard carriers exiting commercial trucking completely or significantly changing their underwriting appetite for certain risks. Just recently, AM Best announced that it has placed Hallmark Financial Services Inc. and its subsidiaries under review due to increased volatility and claim severity trends.

Hallmark Financial Services Inc.

Hallmark Insurance Group, with company operations headquartered in Dallas, Texas, has incurred negative implications to its financial strength rating (FSR) of A- (excellent) and Long-Term Issue Credit Ratings (ICRs) of a- (excellent).

The downgrade is attributed primarily to the binding of primary auto business for the 2016 and 2017 underwriting years, with only a small portion to general liability. As a result, the company has exited from binding primary auto risks and has immediately ceased writing new commercial auto business, which represented approximately $114 million of the company’s gross written premium for 2019.

The current “under review” ratings will remain in place until AM Best has assessed the company’s full-year reserve information to determine the appropriate capital charges associated with enterprise reserves and are as follows:

The FSR of A- and the Long-Term ICRs of a- have been placed under review for the following companies:

  • American Hallmark Insurance Company of Texas.
  • Hallmark Insurance Company.
  • Hallmark Specialty Insurance Company.
  • Hallmark County Mutual Insurance Company.
  • Hallmark National Insurance Company.

In addition, Hallmark Financial Services Inc.’s Long-Term IR has been placed under review with negative implications, including Long-Term IRs for securities available under the company’s shelf registration.

For brokers with commercial transportation risks currently placed with Hallmark Financial, the company is said to be evaluating its reinsurance options in an effort to help ensure an orderly exit from this segment of the commercial auto market that will include an adverse development cover or loss portfolio transfer to help mitigate future volatility issues.

The trucking industry is up against a difficult market in 2020. At Worldwide Facilities, we’re experiencing a growing number of new business submissions accompanied by nonrenewal notices from our retail brokers. As Hallmark Financial Services Inc. and other top A-rated standard carriers move out of the auto liability business for truckers, our wide market access is providing opportunities for you to write and retain more of your transportation book.

For information and market options for placing new or renewal transportation accounts, please contact Loren Henry at lhenry@wwfi.com or 619-541-4265.

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