OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of A (Excellent) and the issuer credit rating of “a” of Bison Insurance Company Limited (Bison) (Charleston, SC). The outlook for both ratings is stable.
The rating actions reflect Bison’s historically excellent capitalization, consistent operating profitability driven by favorable underwriting results, conservative reserve levels and effective enterprise risk management controls. The ratings also recognize Bison’s history of maintaining sufficient capital and financial resources to support its ongoing obligations.
Partially offsetting these positive rating factors are Bison’s volatile underwriting results, due to its low-frequency, high-severity risk profile, coupled with its high net retained limits relative to its available capital. Additionally, the continually changing risk profile of Bison’s primary insureds directly affects its risk profile. This is mitigated by the company’s conservative reserving philosophy and the ongoing demonstrated support from its parent, Duke Energy Corporation (Duke Energy) (NYSE:DUK).
Bison insures select risks for Duke Energy providing a variety of coverage in property/casualty lines of business. While favorable operating performance has been consistently reported of the most recent five years, underwriting results are volatile, hence susceptible to occasional outsized losses, as evidenced in 2014 when it registered an underwriting loss of $87 million, which resulted in a 25%, or $49 million, decline in the company’s capital and surplus. Nonetheless, this is somewhat mitigated by favorable geographic spread of risk and overall trend of favorable loss history. The outsized shock losses, which generally stem from high property losses, recur in five- to seven-year cycles. The risk management team of Duke Energy takes a holistic approach to managing its risks and utilizes the captive as an integral part in this process. Bison’s long-term growth opportunities primarily depend on the business success of Duke Energy.
A.M. Best believes that Bison is well positioned at its current rating level, and the ratings are not expected to be upgraded or its outlook revised in the near term. Key rating factors that could lead to negative rating actions include a significant and sustained decline in Bison’s risk-adjusted capitalization, net operating performance results that do not meet A.M. Best’s expectations or a material shift in its risk profile that could potentially undermine the stability of its ratings. In addition, deterioration in the credit profile of Duke Energy could impact Bison’s ratings.
A.M. Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated in the United States and throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.
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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