A.M. Best Analysts Upgrade Arch
Ratings agency A.M. Best Co. has upgraded the financial strength ratings [FSR] to A+ [Superior] from A [Excellent] and the issuer credit ratings [ICR] to “aa-” from “a+” of Bermuda’s Arch Reinsurance Ltd., its strategic affiliates and its separately rated affiliate, Arch Specialty Insurance Company.
A.M. Best also has upgraded the ICR to “bbb+” from “bbb” of New York-based Arch Capital Group. Concurrently, A.M. Best has upgraded the ICR to “a-” from “bbb+” as well as all debt ratings of the ultimate holding company, Bermuda’s Arch Capital Group Ltd. The outlook for all ratings has been revised to stable from positive.
Best analysts said the upgrades reflect Arch’s “continued superior operating performance amidst challenging market conditions, consistently excellent capitalization and demonstrated risk management ability.”
The ratings agency reported: “Arch maintains a very strong underwriting culture, which centers on active cycle management and adaptability to varied market conditions. In a market environment where investment yields are hovering at record lows, underwriting profitability needs to be paramount. The company is positioned to write a broad range of property/casualty insurance and reinsurance on a worldwide basis with an emphasis on specialty lines.
“Overall operating results since Arch’s inception have been strong and in certain instances have exceeded most peers in the sector. Typically, Arch has had a smaller share of major industry losses, with 2011 reported losses being no exception, which is demonstrative of the company’s superior risk management. As a result, Arch has reported stable and consistent financial results with lower levels of volatility than many of its peers. Furthermore, Arch has a prudent investment portfolio and conservative reserving philosophy, which helps maintain a strong balance sheet.
“Partially offsetting these positive rating attributes are the current soft market conditions through which Arch, as well as all industry participants, must navigate.”
The Best report concluded: “For Arch, factors that could result in negative rating pressure include unfavorable operating profitability trends, outsized catastrophe or investment losses relative to peers, significant adverse loss reserve development and/or a material decline in risk-adjusted capital. However, factors that could lead to a positive outlook or further rating upgrades would be the continuation of long term, consistently strong operating profitability relative to its peers and maintenance of strong risk-adjusted capital levels.”
Arch was formed in Bermuda, in 2001 to provide a much-needed infusion of highly rated capacity to the specialty property and casualty reinsurance marketplace. The company provides a sound, flexible market for “large lines” on selected property, casualty, nontraditional and multi-line reinsurance contracts.
