4 March 2019Analysis

AM Best gives Nuclear Electric Insurance Excellent rating

AM Best has given US-based Nuclear Electric Insurance Limited (NEIL) a financial strength rating of A based on the insurer’s strong balance sheet, marginal operating performance, favorable business profile and enterprise risk management.

The ratings agency said that NEIL’s management culture and its exclusive leadership position in the US nuclear power industry were further reasons for the A rating. It said that the insurer “essentially underwrites the entire nuclear utility property insurance coverage in the US”.

Negative factors offsetting the positive rating included the company’s focus on property catastrophe risks and related business interruption claims, and the financial stress the company

NEIL’s history of ring fencing enough capital to support its ongoing obligations, including the flexibility to suspend policyholder distributions if required, counted towards its positive rating. The company has the contractual right to assess a retrospective premium for 10 times each member’s annualized premium, which supports its financial flexibility further, even though this facility has never been used.

AMBest said that profitability in underwriting results over the long term could drive further positive rating action. While any moves by the company to increase financial leverage, substantial increases in losses and significant erosion of capital or loss of members could trigger a downgrade