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Best’s News & Research Service - January 06, 2021 02:45 PM (EST)

AM Best Affirms Credit Ratings of Factory Mutual Insurance Company and Its Subsidiaries

  • January 06, 2021 02:45 PM (EST)
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Oldwick //BestWire// - AM Best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICRs) of “aa” of Factory Mutual Insurance Company (Johnston, RI) and its subsidiaries, which are collectively referred to as FM Global Group (FM Global). The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed listing of the companies.)

The ratings reflect FM Global’s balance sheet strength, which AM Best categorizes as strongest, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).

FM Global’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), is considered to be at the strongest level and has been time-tested. The group is a leading global property insurer with a balance sheet that has demonstrated an ability to withstand catastrophes (CATs) year-over-year as evidenced in 2017 and 2018. Substantial reinsurance capacity plays an integral role in its ability to preserve capital.

Although underwriting results in recent years have reflected higher volatility, strong investment gains garnered from FM Global’s sizeable investment portfolio have lessened the impact from heavy catastrophe loss years. Five and 10-year average combined ratios have regressed significantly toward those of the commercial property composite averages, due to the significant catastrophe losses highlighted above. However, its results are net of significant membership premium credits afforded to policyholders based on loss experience and implementation of FM Global’s loss control and minimization recommendations.

Buoyed by its strongest level of risk-based capitalization, management has a history of protecting its policyholders by conservatively reserving losses in a timely fashion. Reserves often reflect worst-case underwriting results typically, especially in CAT scenarios. Superior knowledge of its risks and expedient settlement of claims enable the group to move on quickly from significant CAT events with results, most recently in 2017 and 2018, which have developed favorably in each case, with actual losses approximating half of modeled losses in most cases.

FM Global has a very unique market position and business profile. As a monoline commercial property insurer, the group has a singular focus on its specialty expertise. This specialty focus, combined with its status as a mutual legal entity, enable management to take a longer-term view of running its business and to manage the inherent volatility in its short-tail large commercial property risks. FM Global reinvests heavily in its engineering-based approach, and is an innovator in contributing to the industry’s loss control and minimization through flood mapping and modeling internationally, as well as in cyber risk assessment. FM Global is a well-run organization that has been a consistent property/casualty insurer, with a strong and experienced management team that has plenty of depth.

FM Global’s unique market position of having significant exposure to policyholders with highly recognizable corporate brands can introduce headline or reputation risk for large exposure events, which is especially relevant in this COVID-19 period given the overall potential for business interruption claims. AM Best is comfortable that FM Global’s policy exclusions appropriately protect the company without denying its policyholders protections within its contractual coverages and that its positions are defensible in preserving the company’s strongest level of risk-based capitalization.

The stable outlooks reflect AM Best’s expectation that FM Global’s risk-based capitalization and operating performance will continue to exhibit generally excellent trends. AM Best expects that FM Global management’s ERM capabilities will continue to generate commensurately strong returns in its niche business model of providing calculated risk coverages at high levels for highly protected industrial property risks. The company’s high risk appetite periodically results in volatile underwriting results from CAT events that management has successfully navigated over the group’s long history. Positive rating action could occur with reduced volatility in underwriting results. Negative rating action could result if operating performance or risk-adjusted capitalization falls markedly short of AM Best’s expectations, with deteriorating non-CAT underwriting trends or following a prolonged equity market downturn.

The FSR of A+ (Superior) and the Long-Term ICRs of “aa” have been affirmed with stable outlooks for Factory Mutual Insurance Company and its subsidiaries:


  • Appalachian Insurance Company

  • Affiliated FM Insurance Company

  • FM Insurance Company Limited

  • FM Insurance Europe S.A.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.



Commercial Lines Reinsurance Financial Strength Press Release A.M. Best Rating Services, Inc. Insurance Property And Casualty Insurers Issuer Credit Rating Best's Credit Rating Action Rating Event


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