Utility captive assigned A- rating

The US captive insurer of Anglo-American utility company National Grid Plc has been assigned a financial strength rating of A-. 

National Grid Insurance USA, which has its registered office in Vermont, received a stable outlook from ratings agency AM Best. 

AM Best said NGIUSA has a strong operating performance track record, as demonstrated by a five-year (2019-2023) weighted average return on equity ratio of 8.4%. 

“Overall earnings have been driven by excellent underwriting performance, evidenced by a five-year (2019-2023) weighted average combined ratio of 21.3%,” the agency said. “AM Best expects NGIUSA to accumulate underwriting profits over the longer term, albeit subject to potential volatility given the large net policy limits offered relative to its premium base.”

It added that AM Best assessed NGIUSA’s business profile as limited, reflecting its small and geographically concentrated portfolio of high-value property/casualty cover for NG’s US-based assets. 

“NGIUSA is strategically important to NG as it maintains a key role in supporting the group’s risk management strategy, primarily providing a broad range of property damage and business interruption, casualty, and cyber cover to meet the majority of the group’s insurance needs in the United States,” AM Best said. 

The agency said NGIUSA’s balance sheet was strong. The company also benefited from having rating enhancement from NGIUSA’s affiliate, National Grid Insurance Company (Isle of Man) Limited (NGICL), which is the largest captive of the NG group and provides reinsurance support to NGIUSA.

“NGIUSA’s balance sheet strength is underpinned by risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), at the strongest level,” the agency said. “However, AM Best notes that risk-adjusted capitalisation is materially lower on a catastrophe stressed basis due to the large net line sizes offered by NGIUSA relative to its capital, which exposes its risk-adjusted capitalisation to potential volatility. 

“The assessment also factors in the company’s high reinsurance dependence, which is partially mitigated by the strong credit quality of the reinsurance panel.”

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