A.M. Best has affirmed the financial strength rating of A (Excellent) and the long-term issuer credit rating of “a” (Excellent) of National Grid Insurance Company (Isle of Man) (NGIC), a captive insurer of National Grid (NG).
The outlook of these credit ratings is stable.
The ratings reflect NGICL’s balance sheet strength, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
NGICL’s balance sheet strength is underpinned by risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR).
A.M. Best expects NGICL’s BCAR scores to remain “comfortably above the minimum required for the strongest assessment”, reflecting the company’s strategy to maintain sufficient capital buffers to absorb potential volatility stemming from the large maximum policy limits it provides.
The risk-adjusted capitalisation is supported by the captive’s low net underwriting leverage and a comprehensive reinsurance programme.
According to the rating firm, NGICL has a track record of strong underwriting performance, as evidenced by a five-year weighted average combined ratio of 66.8 per cent.
NGICL’s operating performance is subject to volatility, due to the captive’s exposure to low frequency, high severity losses in its property damage and business interruption account.
“This was demonstrated by two large losses in the 2021 financial year, which are expected to contribute to a combined ratio in excess of 200 per cent, based on unaudited financial results for the year-end March 2021,” A.M. Best adds.
A.M. Best states that nonetheless, NGICL’s technical discipline is expected to support a strong operating performance in the longer run.
NGICL’s neutral business profile assessment reflects its core role in NG’s risk management strategy as its principal captive.
A.M. Best believes that the company is well-integrated into the group’s overall risk management framework, providing a broad range of primarily property damage, business interruption, casualty, and cyber cover to cater for NG’s insurance needs.
