A.M. Best Affirms Ratings of The Hamilton Insurance Corp.
A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and issuer credit rating of “a+” of The Hamilton Insurance Corp. (Hamilton) (New York, NY). The outlook for both ratings is stable.
The ratings reflect Hamilton's excellent risk-adjusted capitalization, strong liquidity and conservative operating strategy. Also inuring to Hamilton's ratings is the incorporation of a favorable business plan, which the profitability and liquidity metrics of the ratings are based.
Partially offsetting these positive ratings factors is Hamilton's short operating history, limited market scope/business profile, product mix and dependence on third parties for processing, servicing and administration. Furthermore, somewhat offsetting these positive rating factors is the company's relatively large (gross) underwriting exposures as it offers high gross insurance limits and execution risk associated with the implementation of Hamilton's business plan.
Additionally, the ratings recognize Hamilton's excellent business position and its relationship with its parent, The Bank of New York Mellon Corporation (BNY Mellon) [NYSE: BK], a leading global financial services company. Hamilton provides comprehensive re/insurance coverage/products to BNY Mellon. Hamilton benefits from BNY Mellon's robust enterprise risk management (ERM) framework as it follows BNY Mellon's ERM practices, financial resources, risk mitigation and the safety programs implemented throughout the organization. Hamilton's projected operating results indicate favorable returns, and its surplus base of over $1.2 billion is adequate to support its asset and credit risk exposure. While the excess all risk cash and securities program and the property coverages offer significant insured values (considering the high coverage limits offered), the net impact of the credit risk could be burdensome. Nonetheless, A.M. Best believes this is mitigated by the historical fact that BNY Mellon has not experienced significant claims for these coverages in the layers insured by Hamilton. Also, A.M. Best recognizes the low probability of such events.
Hamilton has met A.M. Best's stringent requirements for newer company formations. The company's ratings are a reflection of its ability to meet A.M. Best's onerous capitalization requirements, which mandate a more conservative level of risk-based capital to support the company's ratings.
Hamilton's ratings are not expected to be upgraded and its outlook revised within the next year as the company's operating performance and capital position have already been considered in the ratings process. Nonetheless, the potential for negative rating actions could result if the company's volatility in operating performance exceeds A.M. Best's expectations and results in a significant prolonged decline in its risk-adjusted capitalization. In addition, deterioration in the credit profile of BNY Mellon could impact Hamilton's ratings.
A.M. Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated in the United States and throughout the world.
For current Best's Credit Ratings and independent data on the captive and alternative insurance market, please visit www.ambest.com/captive.
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 utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Alternative Risk Transfer (ART)”; “Rating New Company Formations”; “Understanding BCAR for Property/Casualty Insurers”; “Catastrophe Analysis in A.M. Best Ratings”; and “The Treatment of Terrorism Risk in the Rating Evaluation.” Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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 Co.
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