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Best’s News & Research Service - December 02, 2022 10:32 AM (EST)

AM Best Revises Issuer Credit Rating Outlook to Negative for Lancashire Holdings Limited and Its Subs; Affirms Credit Ratings

  • December 02, 2022 10:32 AM (EST)
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Oldwick //BestWire// - AM Best has revised the outlook to negative from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term ICR of “a+” (Excellent) of Lancashire Insurance Company Limited (Hamilton, Bermuda) and Lancashire Insurance Company (UK) Limited (United Kingdom) (collectively referred to as Lancashire). The outlook of the FSR is stable. Additionally, AM Best has revised the outlook to negative from stable and affirmed the Long-Term ICR of “bbb+” (Good) of the parent company, Lancashire Holdings Limited (Lancashire Holdings) (Hamilton, Bermuda) [LSE: LRE].

The Credit Ratings (ratings) reflect Lancashire’s balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).

Lancashire maintains the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). In addition to the strongest level of risk-adjusted capitalization, the assessment of balance sheet strength is supported by the group’s financial flexibility and history of prudent reserving. Also reflected in the ratings is Lancashire’s historically strong overall performance, driven by underwriting results in non-catastrophe-affected years and complemented by investment income and fee income. However, the negative outlook on the Long-Term ICR reflects the trend in outsized volatility in Lancashire’s operating performance results relative to its current assessment composite. Although management has taken steps to mitigate this volatility, AM Best expects these steps will take time to translate to results, and that over the near term, the group’s results likely will continue to display heightened volatility relative to the composite during active catastrophe years.

Lancashire is a specialty underwriter with a good degree of geographic and product line diversification, as the company’s offerings include primary insurance, reinsurance and retrocessional coverages written on a global basis through traditional capacity, Lloyd’s and its Kinesis platform. The group’s ERM is considered embedded and appropriate for Lancashire’s elevated risk profile.

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 specializing 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.

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