28 September 2018Analysis

AM Best upgrades offshore group captive Raffles

Ratings agency AM Best has upgrades the financial strength rating to A (Excellent) from A- of Raffles Insurance, a group captive based in the Cayman Islands.

Raffles is one of the world's largest heterogeneous, member-owned group captives, which was formed by Captive Resources in 1984. It provides an insurance programme to a select group of heterogeneous members in small to midsize industries, including manufacturing, contracting, distribution and others.

The ratings reflect Raffles’ balance sheet strength, which AM Best categorises as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.

AM Best noted that Raffles has achieved excellent underwriting and overall earnings as a result of management’s rigorous underwriting guidelines maintained over many years, and the active involvement of each shareholder in aggressive loss control and claim management efforts.

"This has enabled Raffles to enhance its capitalization during this time," explained AM Best. "Weaker results registered in some years are somewhat mitigated by the retrospective rating features of the program, and the fact that members are assessed for and required to fund adverse development in incurred losses."

Raffles' concentration of assets is a partially offsetting rating factor, despite its well-diversified investment portfolio, which includes The Captive Investors Fund.

However, AM Best noted Raffles and its members  maintain a certain amount of direct control over the fund, which is closely monitored and diversified. Variable operating performance reflects, in part, large dividends paid to members as a result of favorable underwriting experience in prior years.