AM Best Affirms Credit Ratings Of GAIL

December 3, 2023 | 0 Comments

AM Best has affirmed the Financial Strength Rating of A [Excellent] and the Long-Term Issuer Credit Rating of “a” [Excellent] of Group Ark Insurance Limited [GAIL] [Bermuda].

A statement from the ratings agency said, “GAIL is a wholly owned subsidiary of Ark Insurance Holdings Limited [Ark], the non-operating holding company of the Ark group. Concurrently, AM Best has affirmed the Long-Term Issue Credit Ratings [Long-Term IRs] on GAIL’s outstanding rated instruments. The outlook of these Credit Ratings [ratings] is stable. See below for a detailed listing of Long-Term IR ratings.

“The ratings reflect Ark’s consolidated balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management [ERM]. In addition, the ratings reflect GAIL’s strategic importance to Ark, as the group’s Bermuda-based [re]insurance vehicle. GAIL provides reinsurance to Ark’s corporate member at Lloyd’s and writes third-party [re]insurance business.

“Ark is a property/casualty and specialty [re]insurance group, operating through an established Lloyd’s platform. Since 2021, Ark has been scaling up its Lloyd’s platform and underwriting third-party insurance and reinsurance business from Bermuda through GAIL. The group’s scale-up is supported by USD 605 million of capital from White Mountains Insurance Group, Ltd. [WTM], injected on 1 January 2021, and the issuance of USD 164 million of subordinated debt in 2021.

“Ark’s balance sheet strength is underpinned by consolidated risk-adjusted capitalisation being at the strongest level, as measured by Best’s Capital Adequacy Ratio [BCAR]. Ark’s risk-adjusted capitalisation is projected to remain at this level, supported by good internal capital generation. The balance sheet strength assessment considers Ark’s prudent reserving, low risk investment portfolio, good financial flexibility and strong liquidity profile. A partially offsetting factor is the company’s material exposure to catastrophe risk, which AM Best expects to be managed through the appropriate use of reinsurance and robust exposure management.

“The adequate operating performance assessment considers the group’s robust underwriting performance at Lloyd’s and execution of its scale-up business plan to date. AM Best expects Ark to maintain good technical return metrics over the underwriting cycle, notwithstanding the execution risk associated with its continued scale-up. In 2022, Ark reported a consolidated combined ratio of 85.8%, as calculated by AM Best. While the company’s profitability remains exposed to potential volatility from catastrophe events, Ark’s recent underwriting performance has proven resilient to event losses. In 2023, Ark reported a combined ratio for the first nine months of 86.5%, driven by selective underwriting across all lines of business, strengthening of premium rates and prior-year reserve releases.

“Ark’s neutral business profile assessment is reflective of its established profile at Lloyd’s, and its current and projected diversified underwriting portfolio. The group’s gross written premium reached USD 1.5 billion in 2022, compared with USD 1.1 billion in 2021 and USD 596 million in 2020, indicating positive market acceptance of the scale-up. In line with its business plan, Ark has achieved further growth over 2023, with gross written premium reaching USD 1.7 billion for the first nine months of the year. Ark benefits from experienced and stable management and underwriting teams, which partially mitigates the execution risk associated with the material scale-up of its operations.”

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