Ratings Roundup: Ins. Corp. Barbados, Ansvar, National Grid

A.M. Best Co. has assigned a financial strength rating of ‘A-‘ (Excellent) and an issuer credit rating of “a-” to Insurance Corporation of Barbados Limited (ICBL) with stable outlooks. Best said the rating actions “reflect ICBL’s solid capitalization, leading market presence in its domestic market, favorable operating results in recent years and its affiliation with Bermuda-based BF&M Limited, its majority owner.” ICBL is publicly traded on the Barbados Stock Exchange, and is the leading P/C insurer in the Barbados market and enjoys excellent brand recognition. “ICBL has achieved favorable underwriting results in recent years through prudent risk selection and underwriting discipline,” best added. “Underwriting profitability has been augmented by consistent levels of investment income, and this has enabled the company to continue to enhance its solid capitalization.” In addition Best noted that “ICBL’s affiliation with BF&M Limited, which is publicly traded on the Bermuda Stock Exchange, affords the company potential access to the group’s resources, including information technology, financial services and investment management expertise.” However, “the geographic concentration of ICBL’s business in Barbados and the increasingly competitive market environment in which the company operates” constitute offsetting factors. ICBL, like other regional insurers, has significant exposure to catastrophic losses. The company manages this risk through the utilization of reinsurance to limit its catastrophe exposure to a manageable level and protect its surplus against frequency of events.

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A-‘ (Excellent) and the issuer credit rating (ICR) of “a-” of UK-based Ansvar Insurance Company Limited, both with stable outlooks. Best said it expects Ansvar “to maintain excellent risk-adjusted capitalization, despite planned premium growth in 2010. Shareholders’ funds are expected to continue to increase, supported by higher retained earnings. In addition, Ansvar continues to benefit from the reinsurance support provided by its parent, Ecclesiastical Insurance Office plc (EIO), which includes a 22.5 percent internal quota share arrangement. The company is likely to report a solid pre-tax profit for 2009, although lower than the £5.2 million [$8.44 million] achieved the previous year.” According to Best the Company’s performance in 2008 benefited from “benign claims experience and favorable prior year loss development. Solid underwriting results are anticipated, underpinned by the good performance of the property and liability accounts and despite reserve strengthening for motor business. Earnings are expected to be supported by good investment earnings from the company’s cash and short-dated fixed income investment portfolio. In 2010, challenging market conditions in core business lines are likely to lead to a reduction in underwriting profitability.” In addition Best pointed out that Ansvar “maintains a good business profile within its niche sectors (charities, churches and other voluntary organizations), focusing on the small to medium-sized segment of the UK market. Growth in 2010 is likely to be largely driven by the expansion of the charity account (approximately 50 percent of gross written premium in 2009) as the company seeks to increase its market share, with some growth anticipated from its electronic trading initiatives. Although Best believes Ansvar benefits from long-standing broker relationships and specialist expertise in this sector, the impact of the economic downturn, coupled with competitive conditions, may constrain profitable growth.”

A.M. Best Co. has affirmed the financial strength rating of ‘A’ (Excellent) and the issuer credit rating of “a” of National Grid Insurance Company (Isle of Man) Ltd. (NGICL), a captive of National Grid plc. The outlook on both ratings remains stable. The ratings “reflect NGICL’s strong risk-adjusted capitalization and robust business profile, offset by its volatile underwriting performance,” said Best. The rating agency also said it considers that there is a “high level of volatility within NGICL’s portfolio due to the nature of the risks it insures. Although NGICL’s risks are located within zones generally devoid of natural catastrophes, the risk of breakdown or failure of equipment remains ever present, with the potential to incur significant large loss events. However, these risks are largely offset by NGICL’s comprehensive reinsurance program.” The majority of these reinsurers are “highly rated” by Best. In Best’s opinion, NGICL’s relatively high level of retention per occurrence allows for it to fulfill its primary function of absorbing the attritional losses of National Grid plc on its main lines of business (property damage/business interruption and third party liability programs). Best also said it believes “NGICL has a strong risk-adjusted capital position, which is in part due to its strong historical retained earnings.” For the future Best indicated that it expects the “company’s business mix and volumes to remain largely unchanged, and projects the risk-based capitalization to remain strong as National Grid plc continues to deliver its risk management initiatives.” For the 12 months to March 31, 2009, the company made an underwriting profit of £7.9 million [$12.82 million], compared to a loss of £24 million [39 million] loss for 2008, with the improvement over 2008 mainly due to release of the reserves associated with the 2007 floods in the United Kingdom.”