AM Best Affirms Credit Ratings Of OCIL

September 22, 2019

AM Best has affirmed the Financial Strength Rating of A- [Excellent] and the Long-Term Issuer Credit Rating of “a-” of Oil Casualty Insurance, Ltd [OCIL] [Hamilton, Bermuda]. AM Best also has affirmed the Long-Term Issue Credit Rating of “bbb” on the $200 million 8.00% deferrable subordinated debentures, due Sept. 15, 2034. The outlook of these Credit Ratings [ratings] remains stable.

The ratings agency said, “The ratings reflect OCIL’s balance sheet strength, which AM Best categorizes as strongest, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management [ERM].

“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 treaty/facultative property coverage within the energy sector, with the objective of reducing the overall volatility of the company’s book of business, which is still significant. The company recently 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, which are 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 ERM program has proven effective at controlling losses over the past several years. The management team is very seasoned, with its members having a number of years of experience in the insurance, financial and energy industries. They also possess a demonstrated track record of successfully implementing strategic initiatives.

“Favorable underwriting results, combined with a reduction in volatility, could lead to positive rating action for OCIL. Negative rating actions could result from a material reduction in the company’s risk-adjusted capitalization and a sustained decline in operating performance.”

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