A.M. Best Affirms Ratings of National Grid Insurance Company (Isle of Man) Limited
A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating of A (Excellent) and issuer credit rating of “a” of National Grid Insurance Company (Isle of Man) Limited (NGIC) (Isle of Man). The outlook for both ratings remains stable.
The ratings of NGIC reflect its strong level of risk-adjusted capitalisation, which is supported by a comprehensive reinsurance programme. The ratings also consider the captive's importance within the risk management framework of its parent, National Grid plc. (NG plc). An offsetting rating factor relates to the volatility of NGIC's operating performance.
A.M. Best expects risk-adjusted capitalisation to remain strong, in spite of NGIC's exposure to Superstorm Sandy during financial year 2013. Gross losses derived from Superstorm Sandy are expected to amount to GBP 186 million. However, this loss was largely mitigated by NGIC's comprehensive reinsurance progamme, which is placed with highly rated reinsurers. NGIC's net loss exposure to Superstorm Sandy is unlikely to exceed GBP 40 million.
NGIC's underwriting results are subject to considerable volatility, owing to the nature of risks it underwrites. Exposure to large loss events in financial year 2013 is expected to result in a combined ratio (loss ratio plus operating expense ratio) in excess of 200%. However, technical earnings continue to be supported by the company's prudent reserving approach. A.M. Best will continue to monitor the underwriting performance of NGIC going forward.
NGIC remains core to NG plc's risk management framework, with the objective of mainly mitigating exposure to business interruption and property damage.
Upward rating movement is unlikely at present.
Negative rating actions could occur if a poor underwriting performance were to become more frequent in the near future, and/or a material deterioration of risk-adjusted capitalization were to occur. In addition, a significant deterioration in NG plc's financial profile would likely lead to a review of NGIC's ratings.
The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Key criteria utilised include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding Universal BCAR”; “Catastrophe Analysis in A.M. Best Ratings”; “Rating Members of Insurance Groups”; and “Alternative Risk Transfer (ART)”. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.
A.M. Best Europe – Rating Services Limited is a subsidiary of A.M. Best Company. Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
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A.M. Best Company, Inc.
Konstantin Langowski, +(44) 20 7626 0318
Associate Financial Analyst
Anandi Nangy-Kotecha, +(44) 20 7626 0271
Associate Director, Analytics
Rachelle Morrow, +(1) 908-439-2200, ext. 5378
Senior Manager, Public Relations
Jim Peavy, +(1) 908-439-2200, ext. 5644
Assistant Vice President, Public Relations