A.M. Best Upgrades Credit Ratings of FAIR Oil & Energy Insurance Syndicate

LONDON--()--A.M. Best has upgraded the Financial Strength Rating to B+ (Good) from B (Fair) and the Long-Term Issuer Credit Rating to “bbb-” from “bb+” of FAIR Oil & Energy Insurance Syndicate (FOEIS) (Bahrain). The outlook of these Credit Ratings (ratings) has been revised to stable from positive.

The ratings reflect FOEIS’ balance sheet strength, which A.M. Best categorises as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. The rating upgrades reflect the material growth in the syndicate’s absolute capital base and the resulting significant improvement in its risk-adjusted capitalisation.

FOEIS is one of four reinsurance vehicles formed by the Federation of Afro-Asian Insurers and Reinsurers (FAIR), with a remit to write energy business. The syndicate’s members are drawn from participants of FAIR, who subscribe to FOEIS’ units of capacity. Whilst unique in its legal structure, the syndicate operates like a traditional reinsurer, providing capacity and expertise to its cedants.

FOEIS’ balance sheet strength is driven by the strongest level of risk-adjusted capitalisation, supported by a conservative investment portfolio and prudent reserving. Risk-adjusted capitalisation strengthened considerably in 2016 and 2017, owing to a change in capital strategy. In October 2016, the syndicate made a cash call on all outstanding subscribed units. As a result, all units have been fully paid up and the syndicate’s capital is expected to increase to approximately USD 28 million at year-end 2017 from USD 21 million at year-end 2016. Limiting factors to the balance sheet remain the exposure to unrated reinsurers in the retrocession panel and the relatively small overall capital base, which exposes risk-adjusted capitalisation to volatility.

FOEIS’ reported net profits for 2016 amounted to USD 3.1 million, a modest decline from USD 3.3 million in 2015. Operating profits are principally driven by the performance of its technical operations. FOEIS has demonstrated a strong level of technical performance, with a combined ratio of 74.4% in 2016, (2015: 65.2%). Draft accounts for 2017 indicate a higher-than-average combined ratio in excess of 90%, owing to a single large loss.

Although limited in size, FOEIS benefits from a defendable niche business profile. Members provide the syndicate with good access to energy risks across the Afro-Asian territories, supplemented by business written through the open market across the region. Whilst the syndicate is heavily concentrated by line of business, FOEIS benefits from diversification through the geographical spread of its business.

This press release relates to Credit Ratings 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 see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

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Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Contacts

A.M. Best
Emily Thompson, +44 20 7397 0291
Associate Financial Analyst
emily.thompson@ambest.com
or
Salman Siddiqui, ACA, +44 20 7397 0331
Associate Director, Analytics
salman.siddiqui@ambest.com
or
Christopher Sharkey, +1 908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, +1 908-439-2200, ext. 5644
Director, Public Relations
james.peavy@ambest.com

Contacts

A.M. Best
Emily Thompson, +44 20 7397 0291
Associate Financial Analyst
emily.thompson@ambest.com
or
Salman Siddiqui, ACA, +44 20 7397 0331
Associate Director, Analytics
salman.siddiqui@ambest.com
or
Christopher Sharkey, +1 908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, +1 908-439-2200, ext. 5644
Director, Public Relations
james.peavy@ambest.com