OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a+” (Excellent) of Electric Insurance Company (EIC) (Beverly, MA). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect EIC’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. The ratings also take into consideration the value-added commercial insurance services provided to its parent, General Electric Company (GE) and EIC’s strategic importance to GE.
EIC’s ratings reflect its balance sheet strength assessment that is underpinned by risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). EIC’s ratings also reflect company’s conservative reserving approach with consistent favorable calendar and accident year development, consistent level of investment income, favorable expense management and trending claim losses. The company provides commercial lines coverage to GE, and personal lines coverage to GE’s current and former employees, as well as the general public.
Partially offsetting these positive rating factors is the limitation on EIC’s commercial lines business with having GE as its sole policyholder. However, most of the company’s commercial lines are priced retrospectively, contributing to reduced risk and steady earnings. While retrospective pricing features in commercial policies can limit the earnings potential of an insurance company, it also can protect a company from excessive loss by allowing it to charge back losses through premium adjustments. Although EIC’s largest line of business is workers’ compensation, it has limited exposure to terrorism. Due to the divestiture activity of GE, EIC’s premium and reserve levels have continued to decline. In 2021, premium and reserve amounts were down 16% and 31%, respectively, from 2017 levels. As EIC’s exposure has declined, the company has returned significant amounts of capital in the form of stockholder dividends to its parent. AM Best has closely monitored the dividends to the parent and declining surplus levels, and has not seen any weakening to the company’s BCAR scores as a result of this activity.
In May 2021, EIC sold its Ireland-domiciled subsidiary, Electric Insurance Ireland Designated Activity Company (EIIDAC), which provided employers’ liability and general liability coverage to GE in Europe. GE’s European coverage has now been placed into GE’s international casualty program through third-party commercial insurance.
In November 2021, GE announced its plans to split into three companies focused on aviation, health care and energy. There are no changes to EIC’s current structure in the short term. As the transition for the split will take several years to complete, EIC will continue to remain focused on supporting GE’s businesses and further develop its successful personal lines business.
AM 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.
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