OLDWICK, N.J.–(BUSINESS WIRE)–Sep 25, 2020–
AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Oil Casualty Insurance, Ltd (OCIL) (Hamilton, Bermuda). AM Best also has affirmed the Long-Term Issue Credit Rating of “bbb” on the $200 million 8.00% deferrable subordinated debentures, due Sept. 15, 2034. The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect OCIL’s balance sheet strength, which AM Best categorizes as very strong, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The ratings also acknowledge the company’s implementation of its diversification strategy that has moved OCIL beyond being a dedicated provider of excess general liability coverage to policyholders that operate primarily in the energy industry. This change supports the neutral business profile assessment.
Additionally, OCIL has added significant amounts of net premium over the past year and a half in an effort to take advantage of rate hardening and improved terms and conditions. These improved rates and conditions are expected by OCIL’s management to improve underwriting performance and surplus by retention of stronger net income.
Partially offsetting these positive rating factors is the impact on underwriting results from occasional outsized shock losses, which are mitigated somewhat by retrocessional reinsurance cover purchased by the company and initiatives over the past few years to reduce line of business sizes and concentration. In addition, the company’s capital base is exposed to potential volatility from its equity portfolio and alternative investments. It should be noted that OCIL experienced investment stability compared to similar risk investment portfolios used for benchmarking purposes in 2020.
OCIL’s risk-adjusted capitalization deteriorated as its Best’s Capital Adequacy Ratio (BCAR) scores decreased in 2019 and projected 2020 due to the aforementioned premium and resulting loss reserve growth. BCAR scores in prior years were very high and are expected to remain supportive of the rating for 2020 and 2021, based on management’s projections. Risk-adjusted capitalization is supportive of the very strong balance sheet strength assessment, which declined from the strongest assessment in prior years.
OCIL’s ERM program has proven effective at controlling losses over the past several years. The management team is very seasoned, with its members having a number of years of experience in the insurance, financial and energy industries. The team also possesses a demonstrated track record of successfully implementing strategic initiatives.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media – Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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KEYWORD: NEW JERSEY EUROPE UNITED STATES NORTH AMERICA
INDUSTRY KEYWORD: INSURANCE PROFESSIONAL SERVICES
SOURCE: AM Best
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PUB: 09/25/2020 01:27 PM/DISC: 09/25/2020 01:26 PM