A.M. Best Co. this week [June 25] upgraded the financial strength rating to A [Excellent] from A- [Excellent] and the issuer credit ratings [ICR] to “a” from “a-” of Bermuda’s Ironshore Insurance Ltd. and its affiliated operating companies: Ironshore Indemnity Inc., Ironshore Specialty Insurance Company and Ironshore Europe Limited. Concurrently, A.M. Best has upgraded the ICR to “bbb” from “bbb-” of Cayman-based Ironshore Inc.
The outlook for all ratings has been revised to stable from positive.
In a statement, Best said the rating upgrades “reflect Ironshore’s strong risk-adjusted capitalization, enhanced business profile as a specialty casualty underwriter and highly experienced management team. The organization has made notable progress regarding the build out and transformation of its franchise under the current management.
“Ironshore has been effective in the optimization of its distribution channels in order to view a broad spectrum of submissions to develop a select portfolio of global specialty business. In addition, Ironshore continues to attract highly qualified insurance professionals with established business relationships to add depth to the organization. Qualitatively, in recent years the company has made durable progress across numerous facets of the organization, which prospectively should solidify its position as a leading market for risk managers and major brokers in specialty insurance classes.”
The ratings agency said these strengths are partially offset by Ironshore’s “limited operating history and significant growth in medium-tail casualty classes of business during a soft phase of the casualty market.
“In A.M. Best’s opinion, this growth exposes the company to greater reserve risk due to the uncertainty associated with measuring ultimate loss costs for those longer-tailed classes of business. However, these concerns are somewhat mitigated by the extensive work that Ironshore has done with regards to establishing a rigorous framework for pricing and reserve adequacy. In determining the current ratings, A.M. Best recognizes the greater risk of unfavorable reserve development through the assessment of risk-adjusted capital tests performed, which provides a capital cushion for potential reserve deficiency.”
“Accordingly, Best said rating factors that could lead to rating downgrades for Ironshore or a revision of the outlook to negative include unfavorable operating profitability trends, outsized catastrophe or investment losses relative to expectations and peers, significant adverse loss reserve development and/or a material decline in risk-adjusted capital. Alternatively, factors that could lead to rating upgrades include sustained favorable operating profitability, coupled with maintenance of strong risk-adjusted capital levels.”