OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a+” of Nuclear Electric Insurance Limited (NEIL) (Wilmington, DE). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect NEIL’s balance sheet strength, which A.M. Best categorizes as strongest, as well as its marginal operating performance, favorable business profile and appropriate enterprise risk management. The ratings also acknowledge NEIL’s management culture and its exclusive leadership position in the U.S. nuclear power-generating industry. NEIL provides essentially the entire nuclear utility property insurance coverage in the United States.
Partially offsetting these positive rating factors are the company’s primary focus on catastrophe property risks and related business interruption claims, with the subsequent financial stress this could cause in the unlikely event of two full-limit losses. Despite the recent positive results, the company has reported volatility in underwriting results in recent years due to claims activity, which relates to the fact that the company relies on one market and two principal product lines. However, these factors are reflective of a captive insurer focused on a particular niche market supported by its members. Nonetheless, NEIL’s risk management program is designed to manage risks within the company’s defined tolerance levels. NEIL also maintains a comprehensive loss prevention program.
The ratings also recognize NEIL’s history of maintaining sufficient capital to support its ongoing obligations, which include its financial flexibility to suspend policyholder distributions. NEIL also has the contractual right to assess a retrospective premium for 10 times each member’s annualized premium, which strengthens the company’s financial flexibility. This facility has never been used.
A key rating driver that could lead to positive rating action is profitability in underwriting results over the long term.
Key rating factors that could lead to a downgrade of the company’s ratings over the longer term include increased leverage, substantial increases in losses, and significant erosion of capital or loss of members.
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