11 May 2018Actuarial & underwriting

AM Best rates National Grid captive's financial strength

Ratings agency AM Best has affirmed the financial strength rating of A (Excellent) or National Grid Insurance Company (Isle of Man) (NGICL), a captive insurer of British multinational electricity and gas utility company National Grid.

The outlook of these ratings is stable, and they reflect the captive's balance sheet strength, which is categorised at very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.

NGICL’s balance sheet strength is supported by risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), which is at the strongest level. The ratings agency expects NGICL’s risk-adjusted capitalisation to remain at the strongest level, underpinned by the captive’s low underwriting leverage and comprehensive reinsurance protection.

Due to the captive's exposure to low frequency, high severity losses in its property damage and business interruption account, prospective operating performance remains subject to volatility.

"NGICL remains core to NG’s risk management strategy as its principal captive," said AM Best. "It is well-integrated into NG’s overall risk management framework, with its primary objective being to mitigate the NG group’s European financial exposure to casualty, cyber, property damage and business interruption risks."