LONDON: Insurance sector rating agency, AM Best has downgraded the Financial Strength Rating (FSR) to A- (Excellent) from A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “a-” from “a+” of United Kingdom based Navigators International Insurance Company Ltd. (NIIC).
The outlook of the FSR has been revised to negative from stable, while the outlook of the Long-Term ICR is negative. Concurrently, AM Best has withdrawn these Credit Ratings (ratings) as the company has requested to no longer participate in AM Best’s interactive rating process.
The ratings reflect NIIC’s balance sheet strength, which AM Best categorises as very strong, as well as its marginal operating performance, limited 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).
The rating actions reflect NIIC’s continued lack of strategic direction. As a consequence, AM Best has revised its business profile assessment for NIIC to limited and lowered the level of lift that it receives from The Hartford as, in AM Best’s view, its importance to its ultimate parent has diminished.
The negative outlook on the ratings reflects uncertainty as to the prospective level of commitment to NIIC from The Hartford as its future strategic role within the wider group is unclear.
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 a decrease in underwriting risk following the reorganisation of The Hartford group’s operations in Europe. The balance sheet strength assessment also considers 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 remain affected by the company’s lack of scale.