Arrow Mutual credit ratings downgraded by AM Best after weak underwriting performance

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Arrow Mutual ratings downgrade

Highlights

AM Best downgraded Arrow Mutual Liability Insurance Company's Financial Strength Rating to B++ from A- and Long-Term Issuer Credit Rating to 'bbb+' from 'a-'.
Arrow reported underwriting losses in nine of the last ten years, with 2025 results further weakening due to elevated expenses from a settled former CEO's estate lawsuit.
Despite strong risk-adjusted capitalization and favorable liquidity at year-end 2025, Arrow's ratings are weighed down by surplus volatility, limited financial flexibility, and a constrained monoline business profile.

Rating action reflects losses and 2025 pressures

As reported by AM Best, the Financial Strength Rating of Arrow Mutual Liability Insurance Company is downgraded to B++ (Good) from A- (Excellent), while the Long-Term Issuer Credit Rating is lowered to "bbb+" (Good) from "a-" (Excellent). The rating agency also revises the outlook on these ratings to stable from negative.

AM Best says the downgrades reflect persistent underwriting and operating losses that have not shown sustained improvement. The insurer generates an underwriting gain in only one of the past 10 years, and although results are favorable in 2024, that performance benefits from non-recurring reserve activity.

Results weaken in 2025, with Arrow reporting an underwriting loss driven in part by elevated expenses tied to the former CEO's estate lawsuit, which is settled in 2025. AM Best says these results compare unfavorably with companies assessed at the adequate operating performance level and align more closely with its marginal operating performance assessment.

Balance sheet remains strong despite narrow business profile

AM Best says Arrow's balance sheet strength remains supported by risk-adjusted capitalization at the strongest level, as measured by Best's Capital Adequacy Ratio at year-end 2025. The agency also says liquidity metrics compare favorably with the industry, even as surplus declines in recent years.

Those strengths are partly offset by historical surplus volatility, limited financial flexibility and a dividend-oriented operating model. AM Best continues to assess Arrow's balance sheet strength as very strong, alongside a limited business profile and appropriate enterprise risk management.

The business profile remains constrained by Arrow's narrow focus as a monoline workers' compensation writer, its limited number of policyholders and its geographic concentration in Massachusetts. AM Best adds that the company's risk management practices are supported by policyholder selection, underwriting and loss control measures, as well as the use of third-party specialists.

In our earlier report on Fitch’s ‘AA’ rating for the City of Eugene’s water revenue bonds, we noted that the stable outlook was underpinned by stronger financial reserves and disciplined rate-setting practices. The agency also highlighted the utility’s solid operating framework, ongoing infrastructure investment and a diversified water supply that supports long-term service reliability.

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