By David Bull

June 5 - (The Insurer) - Hybrid fronting carrier Spinnaker Insurance Company has received a 'bbb' long-term issuer credit rating for its $50 million issue of surplus notes, which carry a 9.5% coupon and are due March 2040.

In a statement, AM Best said the proceeds from the surplus notes issue are expected to be used to redeem existing affiliated surplus notes from Spinnaker's parent Hippo Holdings and to build capital and surplus to support future growth.

The AM Best note comes after Hippo CEO Rick McCathron told The Insurer last month that the new $50 million surplus note will allow Spinnaker to grow “aggressively” by supporting existing partners, adding new partners and taking on more underwriting risk on attractive programs.

The note was announced along with the homeowners insurtech’s first quarter results.

“If you look at the long-term profitability and sustainability of our Spinnaker platform, we're highly motivated to continue to grow that platform and support both existing and new partners in that platform,” said McCathron in the interview.

“We opted to raise the surplus note as a way to allow us to grow more aggressively in the Spinnaker channel.”

McCathron said that Spinnaker has been “highly profitable and very successful”, and that additional surplus was needed to support both premium growth and risk participation.

Spinnaker’s loss ratio for non-Hippo business has been below 40% historically, and even with the California wildfires was below 60% in this year’s first quarter.