AM Best has affirmed the Financial Strength Rating of A [Excellent] and the Long-Term Issuer Credit Ratings of “a” [Excellent] of the operating subsidiaries of Essent Group Ltd., which are Essent Guaranty, Inc. [domiciled in Radnor, PA] and Essent Reinsurance Ltd. [Hamilton, Bermuda] [collectively referred to as Essent]. The outlook of these Credit Ratings [ratings] is stable.
The ratings agency said, “The ratings reflect Essent’s balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, limited business profile and appropriate enterprise risk management [ERM].
“Essent’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio [BCAR], is at the strongest level, which is analyzed based on the company’s financial statements as of Dec. 31, 2025. The balance sheet strength assessment of strongest is supported by the company’s compliance with Private Mortgage Insurer Eligibility Requirements [PMIERs 2.0], utilization of traditional reinsurance and mortgage insurance-linked securities [MILS] to reduce its earnings and capital volatility against potential unfavorable macroeconomic conditions, strong liquidity position and conservative investment portfolio, as well as the financial flexibility to raise capital.
“Essent’s operating performance assessment of strong is supported by low loss and combined ratios recorded over the past five years. Heightened persistency has allowed for continued growth in insurance in force despite lower new insurance written over the past several years. Net investment income remains elevated given the current interest rate environment. The company’s percentage of loans in default on Dec. 31, 2025, remains low as Essent’s credit profile continues to be strong driven by its strict underwriting standards and the effect of the risk-based capital charges established by PMIERs 2.0.
“AM Best assesses Essent’s business profile as limited, as the company is a monoline [re]insurer. Furthermore, it faces stiff competition from other private mortgage insurers and governmental agencies [e.g., Federal Housing Administration and Veterans Affairs] providing mortgage insurance. In addition, product risk is considered high because the performance of the mortgage insurance industry is linked to the macroeconomic environment and the standards set by the government-sponsored enterprises [i.e., Fannie Mae and Freddie Mac]. The product risk is mitigated somewhat by continued use of reinsurance protection via the traditional reinsurance and MILS markets. Beginning in 2026, Essent began reinsuring non-mortgage-related property/casualty risks via its Bermuda subsidiary, Essent Reinsurance Ltd. The size of the exposure at this time is relatively small compared with the core mortgage insurance business.
“Essent’s overall ERM assessment is appropriate, as the company employs a robust ERM framework and infrastructure that is embedded across the company. Essent’s ERM framework is commensurate with the size, nature and complexity of its mortgage insurance business. AM Best considers Essent’s risk assessment capabilities to be aligned appropriately with its risk profile.”