Insurer Surrenders License To BMA
A.M. Best Co. yesterday [Oct. 11] withdrew the financial strength rating [FSR] of A [Excellent] and issuer credit rating [ICR] of “a” of Hatherley Insurance Ltd. due to its business being transferred into Park Assurance Company. Concurrently, A.M. Best has affirmed the FSR of A and ICR of “a” of Park. The outlook for both ratings is stable.
Hatherley’s book of business consists of mainly liability coverages, including high deductible reimbursement policies issued to JPMorgan Chase & Co., a leading global financial services group, which covers workers’ compensation, auto liability and general liability.
These have been novated and transferred to Park. Hatherley has applied to the Bermuda Monetary Authority to surrender its license — and the BMA has issued an order cancelling Hatherley’s registration.
The ratings of Park reflect its strong balance sheet, excellent liquidity and conservative operating strategy. The ratings also recognise the company’s favorable operating results and its role as a single parent captive of JPMorgan Chase.
Partially offsetting these positive rating factors are Park’s large gross underwriting exposures as it offers very high insurance limits and insures some properties with substantial insured values. Park is very dependent on reinsurance in order to offer its various property programs and high limits.
Park provides JPMorgan Chase with global property coverages, including coverages against terrorism losses and going forward, high deductible reimbursement policies covering workers’ compensation, auto liability and general liability.
Therefore, it is a key component of JPMorgan Chase’s risk management strategy and benefits from the group’s significant financial resources. Park also benefits from the group’s extensive risk mitigation and safety programs.
As the company cedes most of its global property programme, its exposure to underwriting losses is minimal, barring significant losses from terrorism.
Park uses only highly rated reinsurers, and its surplus base is more than adequate to support its asset and credit risk exposures.
However, as the company offers very high limits, its resulting gross underwriting exposures on its largest properties also are very high. Park’s dependence on reinsurance is therefore substantial, creating considerable credit risk in the event of exceptionally large losses.
In addition, the company is dependent on the protection afforded by the Terrorism Risk Insurance Program Reauthorization Act of 2007. While the TRIPRA programme offers significant protection from terrorism losses, the net impact on Park could still be burdensome considering the high coverage limits offered.
Nevertheless, A.M. Best recognises the low probability of such extreme events and the support available to the company as part of JPMorgan Chase.
