A.M. Best has affirmed the long-term issuer credit rating (ICR) of “a-” (Excellent) of W. R. Berkley Corporation (W. R. Berkley), based in Connecticut as well as all associated long-term issue credit ratings (IRs) and indicative long-term IRs for securities issued by W. R. Berkley.
The rating firm also affirmed the financial strength rating (FSR) of A+ (Superior) and the long-term ICRs of “aa-” (Superior) of Berkley Insurance Company (BIC), based in Delaware and its reinsured subsidiaries and affiliates, collectively referred to as the W. R. Berkley Insurance Group (the Berkley Group).
Meanwhile, it has affirmed the FSR of A+ (Superior) and the long-term ICR of “aa-” (Superior) of Berkley Life and Health Insurance Company (Berkley Life and Health), based in Iowa.
The ratings of the Berkley Group reflect its balance sheet strength, which A.M. Best assesses as strongest, as well as its strong operating performance, favourable business profile and appropriate enterprise risk management (ERM).
Berkley Group’s balance sheet strength is anchored by its risk-adjusted capitalisation, which A.M. Best says has consistently been at the strongest level as measured by Best’s Capital Adequacy Ratio (BCAR).
“The organisation has demonstrated an ability to effectively access capital markets as needed and continues to report leverage and coverage metrics that are generally in line with industry composites, although unadjusted leverage is somewhat higher than peers at 34.1 per cent,” A.M. Best says.
However, A.M. Best says while the Berkley Group does have somewhat higher exposure to higher-risk assets, losses tied to these holdings have been minimal, a nod to their investment management expertise.
“The Berkley Group’s favourable operating performance continues to reflect its strong operating metrics, with a trend of favourable returns on revenue and equity,” states A.M. Best.
Reduced expenses resulting from the implementation of a remote work environment and the diversification of product and distribution, allowed the group to maintain a steady stream of operating income, according to A.M. Best, despite the challenges of the COVID-19 pandemic and increased weather-related events in 2020.
Meanwhile, the ratings of Berkley Life and Health reflect its balance sheet strength, which A.M. Best assesses as strongest, adequate operating performance, neutral business profile and appropriate ERM, as well as the financial and operational support of the parent company.
Berkley Life and Health balance sheet strength assessment is supported by risk-adjusted capitalisation at the strongest level, as measured by BCAR, as well as the company’s continued capital growth, maintenance of a high quality investment portfolio and favourable liquidity measures.
Berkley Life and Health has reported premium growth over the past several years, however, it reported a decline at year-end 2020 as the company reduced underperforming business and ceded a greater portion to reinsurance.
A.M. Best states: “The group captive business segment exceeded the employer stop-loss business segment for the first time as the fastest growing and most profitable segment.”
Berkley Life and Health maintains a market niche in the small group medical stop-loss space and is a market leader in the related benefits group captive market.
However, A.M. Best notes that the company operates in a highly competitive medical stop-loss market dominated by larger national carriers.
The company receives implicit and explicit support from W. R. Berkley is fully integrated into the parent organisation’s operations and strategic plans.
