AM Best has affirmed the financial strength rating of A (Excellent) and the long-term issuer credit rating of “a” (Excellent) of Transmonde Services Insurance Company. The outlook of these credit ratings is stable. The ratings reflect Transmonde’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management (ERM). Partially offsetting this is Transmonde’s high retention and concentration in liability lines, with significant loss severity potential. Although AM Best adds that Transmonde has experienced historically favourable loss experience. Additional offsetting factors include the limited market profile as a single-parent captive that derives all its business from its parent company, AM Best adds. Based in Hamilton, Bermuda, Transmonde provides professional, general and pollution liability coverages to members of the International Association of Superintendents, which are subsidiaries of SGS SA (SGS), a publicly traded Swiss company. Am Best says that Transmonde has maintained very conservative underwriting leverage ratios, as surplus has remained strong to support its business volumes. Historically, surplus growth is the result of retained earnings from highly profitable operating results driven by excellent underwriting performance. The company has posted low loss and loss adjustment ratios, which reflect SGS’ effective risk management. Its relatively high per-occurrence retention is mitigated by significant deductibles and conservative reserving practices, says the ratings company. While the rating outlooks are stable, factors that could lead to negative rating action include a material deterioration of risk-adjusted capitalisation or operating performance, decreased strategic importance to the group, or high dividend demands from the parent company depleting capital.
