29 May 2019Analysis

Waste Management Vermont captive NGIC gets Excellent rating

Ratings agency AM Best has affirmed the financial strength rating of A- (Excellent) of  National Guaranty Insurance Company of Vermont (NGIC), a captive insurance company owned by Waste Management.

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

The captive also benefits from the support of Waste Management and risk management strategies afford to it as important factors of the company’s overall financial assurance programme.

Furthermore, the active risk management has benefited capitalisation through loss prevention to generate consistently positive earnings.

The ratings are partially offset by the large percentage of policyholder surplus loaned back to Waste Management in the form of a 24-hour demand note that has caused liquidity measures to underperform its peers.

“This factor is mitigated by WM’s balance sheet size and operating cash flow, which could readily fulfill the loan obligation, if required. Capital levels also are monitored by the Vermont Department of Financial Regulation, which requires the company to maintain a certain aggregate exposure to capital ratio,” AM Best said.

It added: “Additionally, NGIC’s expense ratio compares unfavorably with the surplus lines composite due to the nature of the financial assurance line of business and expenses focused on risk mitigation. However, the company has been able to reduce underwriting expenses significantly over the past five years to further benefit operating and net income.”