Best’s News & Research Service - May 19, 2021 01:07 PM (EDT)
AM Best Affirms Credit Ratings of National Grid Insurance Company (Isle of Man) Limited
- May 19, 2021 01:07 PM (EDT)
London //BestWire// - AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of National Grid Insurance Company (Isle of Man) Limited (NGICL), a captive insurer of National Grid plc (NG). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect NGICL’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
NGICL’s balance sheet strength is underpinned by risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best expects NGICL’s BCAR scores to remain comfortably above the minimum required for the strongest assessment, reflecting the company’s strategy to maintain sufficient capital buffers to absorb potential volatility stemming from the large maximum policy limits it provides. Risk-adjusted capitalisation is supported by the captive’s low net underwriting leverage and a comprehensive reinsurance programme.
NGICL has a track record of strong underwriting performance, as evidenced by a five-year (2016-2020) weighted average combined ratio of 66.8%. Operating performance is subject to volatility, due to the captive’s exposure to low frequency, high severity losses in its property damage and business interruption account. This was demonstrated by two large losses in financial-year 2021, which are expected to contribute to a combined ratio in excess of 200%, based on unaudited financial results for the year-end March 2021. Nonetheless, NGICL’s technical discipline is expected to support a strong operating performance in the longer run.
NGICL’s neutral business profile assessment reflects its core role in NG’s risk management strategy as its principal captive. The company is well-integrated into the group’s overall risk management framework, providing a broad range of primarily property damage, business interruption, casualty, and cyber cover to cater for NG’s insurance needs.
AM Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.
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 specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.