Best Affirms Rembrandt’s ‘A’ Ratings

A.M. Best Co. has affirmed the financial strength rating of “A” (Excellent) and the issuer credit rating of “a” of Bermuda-based Rembrandt Insurance Company, Ltd., a captive operation of Vitol Holding B.V. (Rotterdam), a global oil trading company. The outlook for both ratings remains stable.

“The ratings reflect Rembrandt’s strong risk-adjusted capitalization and its solid financial performance. An offsetting factor is lack of diversification by line of business,” said Best.

Best also said it “believes Rembrandt’s solid risk-adjusted capitalization is likely to improve during each of the next two years, supported by a comprehensive retrocession program and stabilization in net premiums written at approximately their current level. At year-end 2005, the company’s risk-adjusted capitalization deteriorated (though remained supportive of the current rating), predominantly as a result of higher than anticipated one-off significant growth in net premiums (80 percent). This growth was mainly due to new third-party business and increase in marine activity.”

Best indicated that Rembrandt “is likely to generate an operating profit of approximately $15 million during the next two years (compared to the $11.9 million in 2005), largely as a result of strong projected underwriting performance.” The loss ratio is expected to remain in the 48 to 50 percent range in 2006 and 2007–in line with the 2005 level of 51.7 percent—”as a result of continuing excellent results from the company’s portfolio of low loss frequency business. Rembrandt benefits from a very low expense ratio, and A.M. Best forecasts it to remain in line with the 2005 level of 2 percent.”

In Best’s opinion Rembrandt “is exposed to high risk concentration due to the lack of diversification by line of business (marine cargo and charterers’ liability risks accounted for 90 percent of the gross premium income in 2005).”