LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of “a-” of The West of England Ship Owners Mutual Insurance Association (WoE or the Club) (Luxembourg). The outlook for both ratings remains stable.
The ratings reflect WoE’s strong risk-adjusted capitalisation and the continued improvement in technical performance. Additionally, the Club has a good niche business profile, which benefits from its membership of the International Group of Protection and Indemnity Clubs (International Group).
WoE’s risk-adjusted capitalisation is expected to remain at a strong level for the 2015 financial year, supported by a conservative growth strategy and solid earnings retention. WoE’s balance sheet strength is underpinned by its prudent reserving strategy and modest investment risk profile – factors that have previously represented a source of volatility to the Club’s risk-adjusted capitalisation.
For the policy year ending February 2014, WoE reported a combined ratio of 100.8%, compared with 102.5% for the same period in 2013. The sustained improvement in the Club’s technical performance is the result of several measures implemented by management to de-risk WoE’s insurance portfolio and strengthen its reserving approach. Overall earnings remain positive, owing to a stable income stream derived from its investment portfolio of predominantly cash and fixed-income securities. As a result, WoE’s free reserves increased to USD 216 million in February 2014, from USD 197 million reported in the previous year.
WoE has an established niche business profile, which benefits from its membership of the International Group, and a well-diversified book of business of approximately 2,900 vessels underwritten across several geographic areas of management. The Club continues to focus on its core activities – providing Protection and Indemnity (P&I) and Freight Demurrage and Defence (FD&D) cover. Following a two-year period of premium contraction as the Club reduced its exposure to a number of higher risk operating sectors, WoE reported a 4% rise in gross written premiums (GWP) for the year ending February 2014. In the near term, A.M. Best expects a modest growth in the Club’s GWP, supported by a selective underwriting strategy.
Positive rating actions are unlikely in the near term. A significant decline in the Club's underwriting performance or erosion of its risk-adjusted capitalisation to a level outside of A.M. Best’s expectations will likely result in a negative rating action.
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
- Analyzing Contingent Capital Facilities
- 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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