3 August 2018Analysis

Nuclear power captive gets 'Excellent' rating

Ratings agency AM Best has affirmed the financial strength of A (Excellent) of Nuclear Electric Insurance Limited (NEIL), based in Wilmington, Delaware. The outlook remains stable.

NEIL's ratings reflect its balance sheet strength, which AM Best categorises as strongest, as well as its marginal operating performance, favourable business profile and appropriate enterprise risk management.

AM Best also acknowledges NEIL’s management culture and its exclusive leadership position in the US nuclear power-generating industry, with it providing essentially the entire nuclear utility property insurance coverage in the US.

The positive rating factors are partially offset by the company's primary focus on catastrophe property risks and related business interruption claims with the subsequent financial stress this could cause in the unlikely event of two full-limit losses.

AM Best also noted that despite its recent positive results, the company has reported volatility in underwriting results in recent years due to claims activity, which relates to the fact that the company relies on one market and two principal product lines.

These factors are reflective of a captive insurer focused on a particular niche market supported by its members, however.

The ratings agency notes that NEIL's risk management programme is designed to manager risks within the company's defined tolerance levels, and NEIL also maintains a comprehensive lsos prevention programme.

AM Best also recognises NEIL’s history of maintaining sufficient capital to support its ongoing obligations, which include its financial flexibility to suspend policyholder distributions.