Best Affirms FSR for W.R. Berkley (Europe)

A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and the issuer credit rating (ICR) of “a” for W.R. Berkley Insurance (Europe), Limited (WRB) (United Kingdom). The outlook on both ratings remains stable.

The ratings reflect WRB’s strong capitalization and support from its ultimate parent, W.R. Berkley Corporation (United States). The ratings also reflect its strong business profile in the UK professional indemnity (PI) market, as well as its strong financial performance.

A.M. Best believes WRB has a strong risk-adjusted capitalization benefiting from a net worth maintenance agreement (NWMA) issued by the parent and is expected to remain strong as high earnings compensate for the increased capital requirements from the growing book of business.

A.M. Best expects to see a growth of approximately 6% in the core account (primarily PI) to GBP 65 million (USD 115 million) in 2005 (despite the more competitive PI rates) due mainly to the increased business likely to be written, especially within the regional small-to-medium enterprise (SME) market. A.M. Best forecasts WRB’s participation in the consortium with R.J. Kiln & Company Limited (United Kingdom) on property reinsurance business to contribute approximately GBP 21 million (USD 37 million) to gross written premium in 2005.

A.M. Best forecasts WRB’s financial performance to remain strong, resulting in a return on premium of approximately 15% despite a decrease in after-tax profits of between 10% and 15% in 2005 (GBP 6 million (USD 11.5 million in 2004)). A.M. Best expects that the rate reductions across the book of up to 5%, combined with the increased capacity in the PI market, will lead to a deterioration in the overall combined ratio by approximately 8% to 95% in 2005.