AM Best has affirmed the financial strength rating of ‘A-’ (Excellent) and the long-term issuer credit rating (ICR) of ‘a-’ (Excellent) of National Grid Insurance Company (Isle of Man) (NGICL), a captive of National Grid (NG), saying that the outlook of these ratings is ‘stable’. Best attributes these ratings to NGICL’s balance sheet strength, considered ‘very strong’, in conjunction with its adequate operating performance, neutral business profile, and appropriate enterprise risk management. NGICL’s balance sheet strength is sustained by its risk-adjusted capitalisation at the strongest level, as measured by Best’s capital adequacy ratio (BCAR). Best highlights the firm’s strategy to maintain sufficient capital buffers to absorb potential volatility, stemming from its exposure to low frequency, high severity losses. The agency anticipates the captive’s BCAR scores to remain comfortably above the threshold for the strongest assessment, with Best citing the derisking of the captive’s conservative investment portfolio as a key factor in the assessment. A partially offsetting balance sheet factor is the captive’s reinsurance dependence, with counterparty credit risk partially mitigated by the strong credit quality of NGICL’s reinsurance panel. NGICL has a track record of adequate operating performance, generating a weighted average return on equity of 6.4 per cent between 2021 and 2025, which the agency attributes to a prudent approach to underwriting. However, large losses reported on its property damage business interruption portfolio (PDBI) in 2021 and 2022 have caused considerable volatility, Best says. The agency echoes these sentiments in its outlook for the captive’s performance long-term, with underwriting performance subject to potential volatility given its high net line sizes relative to its premium base.
