AM Best has assigned a Financial Strength Rating of B++ (Good) and a Long-Term Issuer Credit Rating of “bbb+” (Good) to Lone Peak Insurance Company (Lone Peak) (South Jordan, Utah). The outlook assigned to these Credit Ratings (ratings) is stable.

The ratings reflect Lone Peak’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

Lone Peak was formed in 2019 in Utah, and writes, both on an assumed and direct basis, failure to perform contractual liability insurance policies (CLIPs). Its core business is centered on the assumption of a portion or risk associated with vehicle service contracts (VCSs), that are issued ultimately by an affiliated vehicle service contract administrator. These VSCs are distributed through various car dealerships nationwide and cover the costs of specified repairs and services related to used autos. Lone Peak’s failure to perform CLIPs, which are written by Lone Peak for this affiliate, safeguard against the risk of claims under the VSCs that exceed an aggregate deductible defined in the policy. Only in instances where the affiliate is unable to fulfill its obligations, would Lone Peak be required to ensure that claims are paid without disruption to customers.

Lone Peak’s balance sheet strength is well supported by its very strong risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). Additional positive balance sheet factors include the company’s strong liquidity, low underwriting leverage, and limited dependence on reinsurance.

In its first four years of operation, Lone Peak has maintained highly profitable underwriting and operating results. Due to the highly profitable nature of its policies, the strong results are expected to continue prospectively.

AM Best assesses Lone Peak’s business profile as neutral, given the low-risk nature of its failure to perform CLIP policies, strong geographic spread, and extensive management experience in the vehicle service contract business.

Lone Peak’s ERM, which has been assessed as appropriate, includes a robust and proactive ERM framework that has been designed to identify, assess, monitor, and manage risk across all levels of its organization.

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