LONDON: AM Best has revised the outlook to negative from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating of A (Excellent) and the Long-Term ICR of “a+” of UK based Navigators International Insurance Company Ltd. (NIIC) with a stable outlook.
These Credit Ratings reflect NIIC’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.
The ratings also reflect, in the form of lift, the support provided to NIIC by its ultimate parent, The Hartford Financial Services Group, Inc. (The Hartford), which includes a capital maintenance agreement from NIIC’s intermediate parent, The Navigators Group, Inc.
The revision of the Long-Term ICR outlook to negative reflects uncertainty as to the future business plans of NIIC, and the impact that this has on its business profile and its strategic importance to The Hartford.
In 2016, NIIC commenced writing marine, casualty and professional liability business in the European Union (EU). The company’s strategy has been under review following the U.K.’s vote to withdraw from the EU and the subsequent transfer of its EU-related business to The Hartford’s Belgium-based operating entity. The volume of business written by NIIC decreased to GBP 7 million in 2019 from GBP 37 million in 2018.
NIIC’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), improved to the strongest level at year-end 2019, as a result of the decrease in underwriting risk following the reorganization of The Hartford group’s operations in Europe. The balance sheet strength assessment also factors in NIIC’s high quality investment portfolio and its comprehensive reinsurance protection.
NIIC’s operating performance has been marginal since inception due to unexpectedly large claims and high start-up expenses relative to premium underwritten. AM Best expects prospective underwriting results to continue to be affected by the company’s lack of scale.