Best Affirms Top Ratings For Hiscox
A.M. Best’s European rating service has affirmed the financial strength rating [FSR] of A [Excellent] and issuer credit rating [ICR] of “a” of Bermuda-based Hiscox Insurance and its local and internationalo subsidiaries.
Concurrently, A.M. Best has affirmed the FSR of A [Excellent] and ICR of “a+” of Lloyd’s of London Syndicate 33, which is managed by Hiscox Syndicates Ltd. [HSL] and the ICR of “bbb+” of Bermuda’s Hiscox Ltd, the ultimate parent holding company of the Hiscox group of companies.
The outlook for all ratings remains stable.
Best analysts said the ratings of the Hiscox operating companies continue to benefit from the strong consolidated risk-adjusted capitalisation and good financial flexibility of the Hiscox group.
Financial leverage is low and liquidity is enhanced by the availability of a $750 million credit facility, which can be issued in the form of a letter of credit against which the group can underwrite at Lloyd’s.
The group has a good performance record, demonstrated by an average five year combined ratio below 90 percent. For 2011, performance will be affected by exposure to the year’s large catastrophes, with losses from the Japan and New Zealand earthquakes, Australian flooding and US tornadoes reserved at 210 million pounds at half year 2011.
Earnings from the more stable portfolios written by Hiscox Guernsey as well as positive prior year reserve development are expected to partly offset catastrophe losses, and A.M. Best expects a combined ratio only slightly above 100 percent.
Investment income for 2011 is expected to be modest, reflecting the low interest rate environment. The group reported unrealised losses in the third quarter of 2011 due to equity market movements and widening credit spreads.
Best said Hiscox benefits from a strong business profile in its core markets and writes a well-diversified portfolio of London market business, including property reinsurance and global errors and omissions, balanced by specialist lines such as fine art, kidnap and ransom and high net worth home insurance. Business is written through a number of insurance subsidiaries and managed Lloyd’s syndicates.
Hiscox Bermuda writes third party property reinsurance business and operates as an internal reinsurer within the Hiscox group.
Best said there remains strong correlation between the main reinsurance business written by the company and that written by Syndicate 33.
Hiscox Guernsey has a strong business profile as a specialist insurer of kidnap and ransom and fine art insurance and benefits from significant reinsurance support from Hiscox Bermuda.
Syndicate 33 has an excellent profile in the London market as a specialist underwriter of a diverse range of business classes. In addition to the support of Hiscox, the ratings of syndicate 33 reflect the underlying strength of the Lloyd’s market.
Hiscox’s corporate member, Hiscox Dedicated Corporate Member [HDCM] provides 72.5 perccent of the syndicate’s capacity, while the remaining capacity is provided by Lloyd’s names.
In 2005, the company opened a Bermuda office, writing a mix of worldwide reinsurance and retail business. The following year Hiscox plc moved its country of domicile from the United Kingdom to Bermuda, adopting the new name Hiscox Ltd.
