21 October 2022Bermuda analysis

AM Best affirms ratings of RICL

AM Best has assigned a Financial Strength Rating of A- and a Long-Term Issuer Credit Rating of “a-” to Bermuda-based Research Insurance Company (RICL). The outlook assigned to these Credit Ratings (ratings) is stable.

RICL is a captive insurance company wholly owned by Battelle Memorial Institute (BMI), an Ohio-based nonprofit corporation and provider of technology-based research, management, commercialisation and educational services to government and industry.

AM Best said that the ratings reflect RICL’s balance sheet strength, which the rating agency assesses as very strong, as well as its adequate operating performance, limited business profile, appropriate enterprise risk management (ERM) and one notch of rating enhancement that it receives from its ultimate parent, BMI.

RICL’s level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), is assessed at the strongest level, where AM Best expects it to remain in future years. The balance sheet strength assessment also considers the company’s low investment risk profile and organic surplus growth achieved over several years. These factors are offset somewhat by the high loss limit (relative to its surplus) that the captive offers the parent.

“Overall, RICL’s operating performance has been profitable as demonstrated by its five-year average combined ratio and net return on revenue measures that exceed AM Best’s commercial composite,” said AM Best. “Consistent operating profits are attributable to favourable underwriting results, and to a greater extent, solid investment income in each of the past five years which, together, have enabled the captive to grow surplus. Further, RICL’s operating performance reflects the inherent benefits of being a captive insurer as it has minimal acquisition costs and administrative expenses, driving its very favourable expense ratio.”

RICL’s business profile is limited, as it writes, mainly on a claims-made basis, products and errors and omissions, umbrella policies for general and employers’ liability, professional liability, property flood deductible buy-down and environmental impairment coverage for its parent and affiliated organizations. RICL is an integral component of BMI’s ERM program.