AM Best has assigned a financial strength rating of ‘A-’ (Excellent) and a long-term issuer credit rating of ‘a-’ (Excellent) to National Grid’s captive, National Grid Insurance USA (NGIUSA).
The outlook assigned to these ratings is ‘stable’.
The ratings reflect the captive’s balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.
The ratings also consider rating enhancement from NGIUSA’s affiliate, National Grid Insurance Company Isle of Man, which is the largest captive of the group and provides reinsurance support to NGIUSA.
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.
In addition, the agency observes that the captive’s overall earnings have been driven by excellent underwriting performance, evidenced by a five-year weighted average combined ratio of 21.3 per cent from 2019-2023.
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.
NGIUSA 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 US.
