“Oxford Insurance Review” is a review conducted by the independent review firm AM Best. The report, “Oxford Insurance Review,” identifies two specific areas of concern related to the operations of Oxford Life, both of which have been previously identified in AM Best’s “Oxford Insurance Review” of January 2020.
First, it was determined that the company had not appropriately mitigated the risks posed by a financial weakness, the fact that the FSA had placed the company under regulatory review, and the possibility that the FSA would impose an asset sale on Oxford, which could affect the company’s ability to pay claims and generate cash flow. Second, a significant change in the company’s risk profile had occurred: a new policy had been implemented that reduced the level of risk the company assumed by reducing the risk level associated with claims.
In the second area, the review concluded that the company’s risk management process was not effective. The review found that the company did not implement effective control measures to evaluate and mitigate the impact of the risks posed by the introduction of the new policy. Although the risk level was reduced to a degree, the review found that this was only because the company had failed to take steps to effectively monitor the implementation of the policy and reduce its impact on the business as a whole.
The review concluded that the failure of the company to properly implement risk management processes resulted in the company making poor risk decisions. In one instance, the company considered reducing its risk exposure by increasing its premium payments but instead chose to increase the size of the premium payments to reflect the company’s risk profile in the face of the new policy. In another instance, the company increased its premium payment despite its assumption of a lower risk profile. In both instances, the review found that the company did not adequately monitor the risks associated with the policy, despite the fact that its risk management controls were designed to ensure that risk was effectively managed.
Finally, the review identified the financial strength of the company as lacking in light of the fact that it had experienced an increase in gross revenues over the last year. The review also determined that the company had not implemented appropriate controls to monitor the strength of the company’s liquidity position or to monitor its credit ratings, both of which have a negative effect on the creditworthiness of a company. In addition, the review determined that the company’s ability to generate cash flow was threatened by a reduction in the level of credit risk exposure that the company assumed from its investment portfolio.
In light of these findings, AM Best concluded that the company’s ability to meet its objectives of generating cash flow and maintaining its financial strength was threatened by the failure of the company to adequately mitigate the risk it assumed in the face of the introduction of the new policy. In addition, the company’s ability to meet its financial strength objectives is also threatened by its failure to adopt an effective risk management plan.
The review also determined that the company has inadequate insurance coverage for its existing and future needs and that the policies issued by Oxford are likely to fail to adequately protect the interests of policyholders, particularly policyholders of large companies. In light of these findings, the review recommended that the Board of Directors of Oxford take appropriate action to protect its policyholders from a number of risks to the financial strength of the company. Specifically, the review recommended that the Board of Directors of Oxford take action to: (a) adopt an effective risk management strategy to mitigate the risk impact of the changes made in the last year on the company; (b) implement effective controls to manage and assess the risk associated with the company’s portfolio; (c) increase the size of the company’s capital base and reduce its reliance on short-term borrowings; and (d) establish an independent board of directors to oversee the implementation of the strategy.
Oxford Insurance is pleasing to have this review completed and we believe that the review provides us with a solid foundation upon which to build upon. The company will continue to work hard to meet its commitment to protect the financial stability of our policyholders and to provide the highest levels of customer service to all of our policyholders. Our goal is simple – we want to make life more affordable for you and your family.