Best’s News & Research Service - June 01, 2022 10:02 AM (EDT)
AM Best Downgrades Credit Ratings of National Grid Insurance Company (Isle of Man) Limited
- June 01, 2022 10:02 AM (EDT)
London //BestWire// - AM Best has downgraded the Financial Strength Rating to A- (Excellent) from A (Excellent) and the Long-Term Issuer Credit Rating to “a-” (Excellent) from “a” (Excellent) of National Grid Insurance Company (Isle of Man) Limited (NGICL or the captive), 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 adequate operating performance, neutral business profile and appropriate enterprise risk management.
The rating downgrades reflect the revision of AM Best’s assessment of the company’s operating performance to adequate from strong following a deterioration in underwriting profitability in recent years. In particular, significant large losses on the captive’s Property Damage Business Interruption (PDBI) book in financial years ending 2021 and 2022 are expected to result in a five-year (2018-2022) weighted average combined ratio in excess of 130%. Actions taken by management to address underperformance issues, notably in the form of significant rate increases, are expected to translate in improved profitability, which should support an adequate operating performance over the underwriting cycle.
NGICL’s balance sheet strength is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best expects the captive’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 its exposure to low frequency, high severity losses. A partially offsetting rating factor is the company’s reinsurance dependence, driven by the large policy limits needed by its parent, NG. Reinsurance is placed with a panel of good credit quality.
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 PDBI, 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 use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
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.