Nuclear Electric Insurance Limited (NEIL) has had its financial strength rating of A (Excellent) and its long-term issuer credit rating of “a+” affirmed by A.M. Best.
The outlook of the Delaware-based captive’s ratings remains stable.
The ratings are reflective of NEIL’s “strongest” balance sheet, its marginal operating performance, favourable business profile, and appropriate risk management.
Also factored in the rating is NEIL’s management culture and its exclusive position in the US nuclear power-generating industry, essentially underwriting the entire nuclear utility property insurance coverage in the US.
Offsetting these positive rating factors partially are the company’s primary focus on property catastrophe risks and related business interruption claims, given the substantial financial stress this could cause in the event of two full-limit losses.
Decent recent positive results, the nature of the risks the captive insurers and its claims activity mean it remains exposed to volatility in underwriting results.
Both of these factors are, however, reflective of a captive insurer focused on a niche market supported by its members.
NEIL has both a risk management programme engineered to manage risks within the company’s defined tolerance levels and a comprehensive loss prevention programme.
Also considered by A.M. Best in the captives rating is its history of maintaining sufficient capital to support its ongoing obligations, including its financial flexibility to suspend policyholder distributions, and the contractual right to assess a retrospective premium for 10 times each member’s annualised premium, which strengthens its financial flexibility.
Future positive rating action could be caused by profitability in underwriting results over the long term.
Increased leverage, substantial increases in losses, and significant erosion of capital or loss of members are key factors that could lead to a rating downgrade.