AM Best Downgraded A-CAP Group Insurance Subsidiaries
Owners of insurance portfolios should monitor how liquidity-strained carriers manage ongoing regulatory and capital pressures.
Updated on Sept. 22, 2026 in Corporate Finance
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AM Best downgraded the credit ratings of Atlantic Coast Life Insurance Company and Sentinel Security Life Insurance Company to C+ from B. The action reflects persistent balance sheet weakness and elevated surrender levels at the A-CAP Group, which remains under review with negative implications.
Why it matters
The rating action, driven by five consecutive quarters of negative operating gains and reputational damage, highlights the risks of high allocations to illiquid assets. For operators, this serves as a warning on counterparty risk and the impact of regulatory scrutiny on policyholder retention.
The A-CAP Group saw its Financial Strength Rating cut to C+ from B, alongside a downgrade to b- for its Long-Term Issuer Credit Rating. This followed five consecutive quarters of negative pretax operating gains and surrender levels that remain elevated compared to 2024 regulatory filings.
The players
AM Best
A global credit rating agency focused on the insurance industry that assesses the financial strength and creditworthiness of carriers.
A-CAP Group
An insurance holding company providing life insurance and annuity products with a portfolio heavily weighted toward illiquid and Level 3 assets.
South Carolina Department of Insurance
The state regulatory body overseeing insurance providers, currently seeking a rehabilitation petition against Atlantic Coast Life Insurance Company.
The details
The downgrade stems from A-CAP Group's heavy exposure to illiquid and Level 3 assets, which created liquidity pressures when regulatory rulings caused a surge in surrenders. The group also faces a pending Rehabilitation Petition filed by the South Carolina Department of Insurance against Atlantic Coast Life Insurance Company. AM Best continues to monitor the carrier's capital ratios and its reliance on both rated and unrated unaffiliated reinsuring counterparties.
Timeline
2024: Capital level deterioration began.
Q1 2025: Surrender levels remained elevated.
H1 2025: Surrenders peaked at multiples of historical experience.
H1 2026: Capital levels and regulatory capital ratios deteriorated.
September 22, 2026: AM Best announced the ratings downgrade.
Market Landscape
The downgrade of A-CAP Group entities aligns with industry-wide scrutiny of capital adequacy under the NAIC's Model Regulation Service guidelines. It underscores how reputational risk can rapidly impact solvency in firms heavily allocated to illiquid assets.
Operators should audit their own counterparty credit exposure, particularly when dealing with insurance carriers or financial partners holding high levels of illiquid, Level 3 assets. Review contract language regarding insolvency triggers and monitor the ongoing rehabilitation proceedings in South Carolina.
The takeaway
Balance sheet transparency is critical when operating alongside entities with significant unrated reinsurance or complex asset allocations. Keep watch for official regulatory filings in South Carolina to understand the potential impact on policyholder capital and broader industry risk thresholds.
Further reading
For more on industry credit trends, see our coverage of Corporate Finance.
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