11 January 2016Actuarial & underwriting

AM Best affirms A- FSA of Cedar Court Indemnity Company

AM Best has affirmed the financial strength rating (FSA) of A- (Excellent) of Cedar Court Indemnity Company. The outlook for the rating is stable.  According to AM Best, the rating reflects Cedar Court’s strong risk-adjusted capitalisation, conservative operating strategy and the critical role it plays as a parent captive insurer of Honeywell International, the diversified technology and manufacturing organisation, serving customers worldwide in the aerospace market. As a parent captive of Honeywell, Cedar Court provides insurance products and services to the various subsidiaries of Honeywell for certain liability risks. Partially offsetting these positive rating factors, according to AM Best, is Cedar Court’s relatively large reserves and incurred but not reported (IBNR) reserves as well as volatile underwriting performance in recent years.  Despite volatility, AM Best said it recognises the role Cedar Court plays, its mission and the ability to accept risk and volatility in exchange for availability and pricing. Its captive orientation also considers the substantial financial resources of its parent, Honeywell. AM Best also recognises Cedar Court’s management and corporate strategy, enterprise risk management practices and its conservative risk culture. Other rating factors that the firm considered include, but are not limited to, the diversification in Cedar Court’s business and geographic scope. Factors that could lead to Cedar Court’s ratings being upgraded or an outlook revised to positive, according to the rating firm, include long-term consistently strong operating performance, maintaining strong risk-adjusted capital levels and executing its business plan.  AM Best said it could downgrade Cedar Court’s ratings and/or revise an outlook if its risk-based capitalisation declines below supportive levels, operating performance and risk profile deteriorate or insured losses deplete capital. In addition, negative rating impact could occur as a result of turnover in its management team and/or risk management controls and tolerances, or its parent’s ratings deteriorate.