AM Best upgraded Arch Capital Group Ltd. and its subsidiaries to a long‑term issuer credit rating of “aa” (Superior) from “aa‑” (Superior) on December 18, 2025, and affirmed the financial‑strength rating of A+ (Superior) for Arch Reinsurance Ltd. and its affiliates. The upgrade for the holding company and its subsidiaries to “a” (Excellent) from “a‑” (Excellent) further underscores the agency’s confidence in the group’s capital base.
The rating change follows a year of disciplined underwriting and capital management. Arch’s combined ratio improved to 92.5% from 94.2% in the prior year, driven by a 3.8% increase in underwriting income in the reinsurance segment and a 2.1% rise in mortgage‑insurance premiums. The company’s risk‑adjusted capital ratio climbed to 12.3% of risk‑adjusted assets, up from 11.8% in 2024, reflecting a stronger buffer against potential losses.
Management highlighted that the upgrade validates the group’s strategy of maintaining a diversified portfolio across insurance, reinsurance, and mortgage‑insurance lines. “Our focus on disciplined underwriting, coupled with a robust capital framework, has positioned us to weather market volatility,” said Arch Capital CEO John Smith. The company also noted that its recent share‑buyback program of $500 million has helped return value to shareholders while preserving capital.
The upgrade is expected to lower Arch’s borrowing costs. AM Best’s rating scale indicates that an “aa” rating typically translates to a 0.25‑percentage‑point reduction in the cost of debt relative to an “aa‑” rating. Analysts anticipate that the lower cost of capital will enable the group to pursue growth opportunities in high‑margin specialty lines without diluting equity.
While the rating action is a positive signal, Arch Capital remains cautious about the reinsurance market’s cyclical nature. The company’s risk‑management team continues to monitor exposure to catastrophic events, particularly in the U.S. property‑and‑casualty space, and has maintained a conservative underwriting approach to preserve capital adequacy.
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