Best Assigns ‘A-‘ Rating to Steamship Mutual (London)

February 20, 2004

A.M. Best Co. announced that it has assigned a financial strength rating of “A-” (Excellent) to the London-based company of the Steamship Mutual Underwriting Association Limited, with a negative outlook.

“The rating reflects the strategic role that Steamship London plays within the Steamship group, which includes Steamship Mutual Underwriting Association (Bermuda) Ltd. (Steamship Bermuda) and The Steamship Mutual Trust (the Trust),” said Best. “It also reflects the transfer of risk to Steamship Bermuda through a reinsurance contract, the protection provided by membership of the International Group of P&I clubs and excellent prospective operating performance. Offsetting factors include volatility in risk-adjusted capitalisation for the Steamship group as a whole.”

Best noted that “Steamship London cedes 90 percent of its gross premium to Steamship Bermuda through an annually renewable reinsurance contract. Steamship Bermuda, in turn, reinsures all its retained risks with the Trust, where the premiums are invested. Members of Steamship London—like members of Steamship Bermuda—are beneficiaries of the Trust. Additionally, Steamship London benefits from protection provided by the International Group reinsurance pool as a separate member.”

Best said it “expects a profit after tax of approximately USD 4.5 million for the current year to February 20, 2004. Prospectively, Steamship London is expected to accumulate significant free reserves from operating profits generated while the company is protected by a stop-loss reinsurance policy provided by Steamship Bermuda. (The stop-loss policy for the current year limits net claims to a maximum of USD 1.5 million.)”

The rating agency also noted that the “volatility inherent in Steamship Bermuda’s risk-adjusted capitalisation applies to Steamship London due to its dependence upon reinsurance protection provided by Steamship Bermuda. A.M. Best believes that against a background of investment and claims volatility, Steamship Bermuda will find it challenging to maintain its existing risk-adjusted capitalisation level.”

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