Nuclear power mutual's ratings affirmed
AM Best has affirmed the Financial Strength Rating of A (Excellent) of mutual insurer Nuclear Electric Insurance (Neil) based in Wilmington, Delaware.
The ratings agency also affirmed the ratings of its Bermuda-based subsidiary, Cedar Hamilton, and its Irish subsidiary, NEIL Overseas Designated Activity Company.
Cedar Hamilton provides specialty lines capacity to Neil’s members, while NEIL Overseas underwrites insurance programmes for nuclear power stations within the European Union.
Neil "essentially underwrites the entire nuclear utility property insurance coverage in the United States", AM Best said, adding that the company continues with its mission of maintaining the financial strength to cover two full-limit nuclear losses, while promoting nuclear industry risk management and safety practices.
AM Best said the ratings reflect balance sheet strength, which AM Best assesses as strongest, as well as its marginal operating performance, favourable business profile, and appropriate enterprise risk management.
The ratings also acknowledge NEIL’s management culture and its exclusive leadership position in the US nuclear power-generating industry.
"Partially offsetting these positive rating factors are NEIL’s primary focus on property catastrophe risks and related business interruption claims, with the subsequent financial stress this could cause in the unlikely event of two full-limit losses," the ratings agency said. "Despite positive results in most years, the company remains exposed to volatility in underwriting results given the nature of the risks it insures and because of claims activity, given that it relies on one market and two principal product lines. However, these factors are inherent to captive mutual insurers focused on a particular niche market supported by its members.
Nonetheless, NEIL designed its risk management programme to manage risks within the company’s defined tolerance levels. NEIL also maintains a comprehensive loss prevention program, with a specialized, effective loss prevention department closely working with insured members to control losses. NEIL’s loss prevention effort is supported by a panel of employed and contract nuclear engineers."
AM Best said the ratings also recognise NEIL’s history of maintaining sufficient capital to support its ongoing obligations, which includes its financial flexibility to suspend policyholder distributions. NEIL also has the contractual right to assess a retrospective premium for 10 times each member’s annualized premium, which strengthens the company’s financial flexibility. To ensure that members’ capitalization is adequate to support such an action, NEIL requires members to maintain an investment-grade credit rating or provide collateral. This facility has never been used.
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