2013-10-02 15:33:02 -
A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating of A- (Excellent) and issuer credit rating of “a-” of Sunderland Marine Mutual Insurance Company Limited (SMMI) (United Kingdom). The outlook for both ratings remains negative.
The affirmation of the ratings reflects SMMI’s improving risk-adjusted capitalisation and strong business profile in its specialist markets.
Following an unusual loss experience in the marine hull account in 2011, the company’s risk-adjusted capitalisation deteriorated substantially.
Steps were taken during 2012 to reduce the impact of such a series of losses in the future and to enhance SMMI’s capital position, including improved risk selection, the purchase of additional reinsurance cover for its protection and indemnity account and a reduction in the company’s
cross class annual aggregate deductible. By year-end 2012, risk-adjusted capitalisation had improved to a level more supportive of the ratings. A.M. Best expects risk-adjusted capitalisation to strengthen further in 2013.
The negative outlook has been maintained to reflect the uncertainty as to whether the actions taken are sufficient to improve SMMI’s long-term operating performance, although a good operating profit is forecast for 2013, supported by a solid investment return.
While SMMI’s business line diversification is limited, it has a strong business profile in its specialist marine and aquaculture markets, where its underwriting expertise and risk management capabilities support high client retention. Business is underwritten in a broad range of territories, which include North America, the United Kingdom, Continental Europe and Australasia.
A.M. Best will continue to monitor SMMI’s operating performance and risk-adjusted capitalisation, given the measures that have been put in place by the company to protect its capital position. Unexpected weak operating performance or deterioration in SMMI’s risk-adjusted capitalisation over the next 12-24 months could lead to negative rating actions. However, SMMI and the North of England P&I Association Limited, with which SMMI formed a strategic alliance in late 2011 and which has provided quota share reinsurance since 2012, announced in August 2013 that they are in talks that could lead to a merger. This merger could lead to positive pressure on SMMI’s ratings.
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 : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww ..
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