A.M. Best Co. has assigned an initial financial strength rating of B+ (Very Good) to Bahrain-based Trust International Insurance Company E.C. (TIIC), a medium sized reinsurer.
The rating reflects the company’s excellent risk-based capital and good business position. Offsetting factors include the company’s historically weak underwriting results and its high reliance on retrocession cover.
On a risk adjusted basis, the company has excellent capitalization according to the Best’s Capital Adequacy Ratio. On an absolute basis, the capital base is relatively small with shareholders’ funds of USD 56.9 million at year-end 2001. Nevertheless, A.M. Best believes the company is in an excellent position to expand its premium volume in line with its plans–net premium income of USD 11.5 million in 2003—without additional capital requirements.
A.M. Best believes the company benefits from strong client relationships in the Arab markets. The company is a leader in onshore and offshore energy business in the middle-east and far east regions—46 percent of gross premium income in 2001—and will benefit from the significant rate increases being experienced in these business lines. The company’s portfolio consists mainly of third party business, which made up 97 percent of 2001 gross premium income, with TIIC also participating on its primary subsidiaries reinsurance program. A.M. Best believes the company will enhance its business position in 2002 and 2003 as it develops new and existing relationships in the region and benefits from the withdrawal of a number of reinsurers from the Arab markets.
TIIC’s underwriting result deteriorated in 2001 to a loss of 0.4 million—0.2 million in 2000—largely as a result of attritional losses and inadequate rates for energy construction business. A.M. Best believes the introduction of a stricter risk selection criteria and rate increases in excess of 30 percent across the book in 2002 are likely to lead to a return to underwriting profitability in 2002 and 2003.
TIIC ceded in excess of 82 percent of premiums in 2001, making the company highly dependent on the pricing and availability of retrocessional cover. The company has renewed its coverage for the 2002/3 years with a number of high quality reinsurers, largely mitigating any concerns in the short term. However, A.M. Best will closely monitor the company’s use of retrocession cover going forward.
• Company results should reflect a return to underwriting profitability as the book of business experiences substantial growth fuelled by a favorable rate environment and more selective underwriting. A.M. Best expects a combined ratio of approximately 90 percent by 2003 assuming normal loss experience.
• Capital will be maintained at a level that is supportive of the current rating.
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