AM Best has downgraded the credit ratings of Massachusetts-based workers’ compensation carrier Arrow Mutual Liability Insurance Co.
The ratings firm downgraded the Financial Strength Rating to B++ (Good) from A- (Excellent) and the Long-Term Issuer Credit Rating to “bbb+” (Good) from “a-” (Excellent).
AM Best revised the outlook of these credit ratings to stable from negative.
AM Best said the rating downgrades reflect Arrow’s “persistent underwriting and operating losses, which have not demonstrated sustained improvement as the company has generated an underwriting gain in only one of the past 10 years.”
Although Arrow reported favorable results in 2024, those results benefited from non-recurring reserve activity, AM Best said. Results weakened in 2025, with the company reporting an underwriting loss driven in part by elevated expenses associated with a lawsuit by former CEO P. Brian Gray’ estate, which was settled in 2025.
“These results compare unfavorably with companies assessed at the adequate operating performance level and are more consistent with AM Best’s marginal operating performance assessment,” the ratings firm added.
The ratings also reflect Arrow’s balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM).
Arrow’s balance sheet strength assessment is supported by its strongest level risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), at year-end 2025, and liquidity metrics that compare favorably with the industry. Arrow’s BCAR has remained at the strongest level despite surplus declines in recent years. However, these strengths are “partially offset by historical surplus volatility, limited financial flexibility and the company’s dividend-oriented operating model.”
The limited business profile assessment reflects Arrow’s narrow product focus as a monoline workers’ compensation writer, its limited number of policyholders and its geographic concentration in Massachusetts.
AM Best said the insurer’s ERM assessment is appropriate for the company’s size, scale and focused risk profile and its risk management practices are supported by policyholder selection, underwriting and loss control measures, as well as the use of third-party specialists.
According to Arrow Mutual, it operates similar to a group captive for large employers in Massachusetts, Maine, New Hampshire, and Rhode Island with $100,000 or more in premium.
Arrow maintains that it is an insurance carrier that is best suited for “safety conscious” employers. All of Arrow’s policies are issued each year on January 1st at the manual rates established by the state insurance commissioner.
Arrow says it is unique among workers’ compensation carriers in that it uses retrospective rating plan as a method of returning substantial premiums to policyholders based on their own experience. In addition, Arrow pays three dividends each year.
Topics
AM Best
Massachusetts
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