14 March 2016Actuarial & underwriting

AM Best affirms ‘A’ rating of National Grid captive

Rating firm AM Best has affirmed the financial strength rating of A (Excellent) of National Grid Insurance Company (Isle of Man) (NGICL), a captive of National Grid. The outlook for the rating remains stable. AM Best said the rating reflects NGICL’s very strong risk-adjusted capitalisation, as well as its importance as a risk management tool within the NG group. In addition, the rating reflects NGICL’s strong but volatile earnings track-record. NGICL’s risk-adjusted capitalisation is expected to remain very strong, supported by the captive’s low underwriting leverage ratio and comprehensive catastrophe reinsurance protection, according to AM Best. Prospective underwriting performance remains subject to volatility, due to the captive’s exposure to low frequency, high severity losses in its property damage and business interruption (PD/BI) accounts. However, the impact of large losses on the captive’s balance sheet is partly mitigated by extensive catastrophe reinsurance protection. The captive has a track-record of strong technical performance, reflected in a five-year average combined ratio of approximately 31 percent, according to AM Best. The rating firm said NGICL has demonstrated its ability to take corrective pricing actions following large losses. NGICL remains core to NG’s risk management strategy as its principal captive. It is well integrated into the parent’s overall risk management framework, with its primary objective to mitigate the NG group’s European exposure to casualty, property damage and business interruption risks.