AM Best Affirms Lancashire Insurance Ratings
AM Best has affirmed the financial strength ratings of A [Excellent] and long-term issuer credit ratings of “a+” [Excellent] for Lancashire’s Bermuda and UK insurance subsidiaries, while maintaining a stable outlook on the ratings.
The ratings agency said, “AM Best has affirmed the Financial Strength Rating of A [Excellent] and the Long-Term Issuer Credit Ratings [Long-Term ICR] of “a+” [Excellent] of Lancashire Insurance Company Limited [Hamilton, Bermuda] and Lancashire Insurance Company [UK] Limited [United Kingdom] [collectively referred to as Lancashire]. Additionally, AM Best has affirmed the Long-Term ICR of “bbb+” [Good] of the parent company, Lancashire Holdings Limited [Hamilton, Bermuda]. The outlook of these Credit Ratings [ratings] is stable.
“The ratings reflect Lancashire’s balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management [ERM].
“Lancashire maintains the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio [BCAR]. Its balance sheet strength is supported by solid levels of capital, financial flexibility and favorable reserve development, since inception. Lancashire benefits from having a publicly traded parent with access to both debt and equity markets, which provides financial flexibility. Active capital management is at the core of how Lancashire manages its business, and this has resulted in consistently returning excess capital to its shareholders via dividends. Reserve development has been favorable every year since inception, which demonstrates the company’s conservative approach to risk. This practice continued after transitioning to IFRS 17 in 2023, with Lancashire being able to maintain healthy margins in its reserves.
“The ratings also reflect Lancashire’s historically strong overall operating performance, driven by underwriting results and complemented by investment and fee incomes. The company’s combined ratios have improved over the last five years when compared with its peers, along with top-line growth. This trend has benefited from benign catastrophe years and from the diversification of Lancashire’s lines of business, which have dampened volatility.
“Lancashire’s neutral business profile assessment reflects its market position as a specialty underwriter with broad geographic presence and product lines, with offerings that include primary insurance, reinsurance and retrocessional coverage written on a global basis through traditional capacity, as well as a Lloyd’s platform. Lancashire has spent the last few years focusing on building a broader, more balanced business capable of navigating market cycles, efficiently. This strategy has resulted in delivering more sustainable and less volatile returns, which is accretive to capital.
“The group’s ERM is considered appropriate for Lancashire’s elevated risk profile.”
