AM Best Affirms Credit Ratings Of Oil Insurance

August 25, 2017

A.M. Best has affirmed the Financial Strength Rating of A- [Excellent] and the Long-Term Issuer Credit Rating of “a-” of Bermuda-based Oil Casualty Insurance, Ltd [OCIL].

A.M. Best also has affirmed the Long-Term Issue Credit Rating of “bbb” to the $200 million 8.00% deferrable subordinated debentures due Sept. 15, 2034, issued by OCIL in 2004 and amended in 2015. The outlook of these Credit Ratings [ratings] remains stable.

A statement from the ratings agency said, “The ratings reflect OCIL’s strong risk-adjusted capitalization, generally solid operating profitability and diversified asset portfolio. The ratings also acknowledge the many strengths of the company’s niche market focus as a dedicated provider of excess general liability coverage to its shareholders and non-shareholder policyholders that operate primarily in the energy industry.

“OCIL has diversified its business in recent years through assumed reinsurance treaties, and has expanded into direct and facultative property coverage within the energy sector, resulting in a reduction of overall volatility of the company’s book of business. The company, in recent years, has expanded its insurance and reinsurance operations to provide property/casualty insurance to global companies outside the energy industry.

“Partially offsetting these positive rating factors is the impact on underwriting results from occasional outsized shock losses, last experienced in 2010 with losses caused by the Gulf of Mexico Deepwater Horizon accident and a large oil spill in Michigan. ‘

“The impact of these outsized losses is mitigated somewhat by retrocessional reinsurance cover purchased by the company. In addition, the company’s capital base is exposed to volatility from its equity portfolio and hedge fund investments.

“OCIL’s enterprise risk management program has proven effective at mitigating losses over the past several years. Its management team is very seasoned, with members having a number of years of experience in the insurance, financial or energy industry, with a demonstrated track record of successfully implementing strategic initiatives.

“A key rating factor that could lead to a positive rating action is a continued trend of favorable underwriting results with a reduction in the volatility of the underwriting results.

“A negative rating action could result from a material decline in the company’s risk-adjusted capitalization.”

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