A.M. Best has affirmed the financial strength rating of A (Excellent) and the long-term issuer credit rating of “a+” of Nuclear Electric Insurance Limited (NEIL). The outlook of these credit ratings remains stable.
The ratings reflect NEIL’s balance sheet strength, which A.M. Best categorises as strongest, as well as its marginal operating performance, favourable business profile and appropriate enterprise risk management.
The ratings also acknowledge NEIL’s management culture and its exclusive leadership position in the US nuclear power-generating industry.
NEIL underwrites the entire nuclear utility property insurance coverage in the US and continues with its mission of maintaining the financial strength to cover two full-limit nuclear losses, while promoting industry risk management and safety practices.
According to A.M. Best, partially offsetting these positive rating factors are the company’s primary focus on property catastrophe risks and related business interruption claims, with the subsequent financial stress this could cause in the unlikely event of two full-limit losses.
Despite recent positive results, A.M. Best explained that the company remains exposed to volatility in underwriting results given the nature of the risks it insures and because of claims activity, which relates to the fact that it relies on one market and two principal product lines.
However, these factors are “inherent” to captive mutual insurers focused on a particular niche market supported by its members, A.M. Best noted.
NEIL designed its risk management programme to manage risks within the company’s defined tolerance levels. The company also maintains a comprehensive loss prevention programme, with a specialised, effective loss prevention department closely working with insured members to control losses.
A.M. Best suggested the ratings also recognise NEIL’s history of maintaining sufficient capital to support its ongoing obligations, which includes its financial flexibility to suspend policyholder distributions.
A key rating driver, according to A.M. Best, that could lead to positive rating action is profitability and reduced volatility in underwriting results over the long term.
However, key factors that could see a rating downgrade include increased leverage, substantial increases in losses and significant erosion of capital or loss of members.
