A.M. Best Co. announced that it has affirmed the financial strength rating of “A” (Excellent) of Luxembourg-based West of England Ship Owners Mutual Insurance Association (the Club or WOE), with a stable outlook.
“The rating reflects the Club’s excellent capitalisation, financial flexibility and prospective operating performance and its solid business position,” said Best. “An offsetting factor is continued reliance upon investment returns.”
Best called -WOE’s current and prospective capitalisation “excellent” and “commensurate with the current rating.” It noted that as a result of its mutual status, “WOE benefits from excellent financial flexibility through its ability to call additional funds from members should the need arise, although in contrast to a number of its peers, the Club has not made an unbudgeted call since the 1991-1992 policy year.”
Best also said it expects the Club “to return to profitability for the year ending February 2004 as a result of significant investment returns emanating from a general recovery in equity markets. Despite the upward trend in protection and indemnity (P&I) market conditions in 2003, A.M. Best expects a loss ratio of approximately 100 percent at year-end February 2004 (compared with 101.2 percent in 2002-2003), mainly resulting from an increase in the incidence of large claims (above USD 500,000).
“Underwriting performance is expected to improve in 2004-2005 (loss ratio between 80 to 85 percent), largely driven by rate increases of up to 20 percent and the termination of relationships with poorly performing members. Despite this improvement, an underwriting profit (net of administration and acquisition costs as calculated by A.M. Best) is not expected in 2004-2005, reflecting the Club’s continued, although reducing, reliance on investment income in the near term.”
Best noted that “WOE is one of the leading members of the International Group (IG) in terms of premium and tonnage and writes business categorised as Class 1- P&I (approximately 90 percent of gross premiums written) and Class 2 freight demurrage and defence (10 percent). In A.M. Best’s opinion, membership of the International Group of P&I Clubs is essential for WOE to maintain its solid business position and market profile, recognising the cost benefits of pooled reinsurance coverage and limits to pricing competition. The Club’s market profile is enhanced by the claims and loss prevention services offered to its members from offices based in London, Hong Kong and Greece. WOE’s underwriting portfolio is well spread geographically and by risk type.”
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