LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of A (Excellent) and the issuer credit rating of “a+” of W.R. Berkley Insurance (Europe), Limited (WRBE) (United Kingdom). The outlook for both ratings remains stable.
The ratings of WRBE reflect its good risk-adjusted capitalisation. Additionally, the ratings reflect WRBE’s continued strategic importance to W.R. Berkley Corporation (WRBC) and explicit parental support in the form of an unlimited and unconditional guarantee provided by Berkley Insurance Company (BIC), a subsidiary of WRBC. Partially offsetting these strengths is the company’s deteriorating underwriting performance.
WRBE maintains a good level of risk-adjusted capitalisation. The impact of operating losses during 2013 and the first nine months of 2014 on capital has been offset by a series of capital injections from BIC in 2014. A.M. Best expects further financial support from BIC to be forthcoming should risk-adjusted capitalisation fall materially below the current level.
The company reported a technical loss of GBP 4.7 million in 2013, reflecting a combined ratio of 102% (2012: 96%). Weak underwriting results coupled with realised/unrealised investment losses and a one-off foreign exchange loss led to an overall pre-tax loss of GBP 9.2 million for 2013. Non-technical performance improved during the first nine months of 2014. However, underwriting results continued to deteriorate and a pre-tax loss of similar magnitude to 2013 is likely to be reported for 2014. Weak technical results in 2013 and the first nine months of 2014 reflect a combination of increased frequency and severity of attritional losses, as well as adverse reserve development on prior accident years.
WRBE’s business profile continues to develop as it focuses on establishing its commercial lines footprint across the United Kingdom and Europe. The company operates a “hub and spoke” business model, with its head office located in the United Kingdom and supporting branch operations in Ireland, Germany, Norway, Sweden and Spain. WRBE continues to be strategically important to its ultimate parent, WRBC, as a means of accessing the U.K. and European insurance markets.
A change in the ratings of BIC may lead to a change in WRBE’s ratings. In addition, negative rating actions could occur if WRBE’s risk-adjusted capitalisation were to deteriorate significantly or if weak technical performance were to persist over the medium term. A reduction in the company’s strategic importance to WRBC or the termination of the guarantee from BIC would also result in negative rating pressure.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilised:
• Catastrophe Analysis in A.M. Best Ratings
• Rating Members of Insurance Groups
• Risk Management and the Rating Process for Insurance Companies
• Understanding Universal BCAR
In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.
This press release relates to rating(s) that have been published on A.M. 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 visit A.M. Best’s Ratings & Criteria Center.
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