A.M. Best Co. announced that it has affirmed the financial strength rating of “B++” (Very Good) of Switzerland’s Infrassure Ltd. with a stable outlook.
“The rating reflects the company’s improving and solid risk-adjusted capitalisation, strong market position in its specialist engineering niche and very good underwriting performance,” said Best. “Offsetting factors are potential gross volatility in loss experience and reliance upon reinsurance.”
Retained earnings, strengthening of equalization reserves and increased cover from an aggregate excess of loss protection have improved the company’s capital position. “Capital is protected by a whole account reinsurance placed with reinsurers rated in the Superior category by A.M. Best, which limits the company’s aggregate annual losses to CHF 20 million (USD 15.3 million),” said the bulletin. “The company’s capital base continues to solidly support planned growth targets. A.M. Best expects further capital improvements with Infrassure’s equalisation reserve increasing to CHF 20 million (USD 15.3 million) by year-end 2005 but, on a gross basis, the company is highly exposed to loss volatility and is therefore reliant upon reinsurance to protect its capital.”
Best said it “expects that business produced by Alstom (Switzerland) Ltd., a specialist engineering firm, will remain a significant proportion of Infrassure’s business in the short to medium term (40 percent of anticipated gross premiums in 2004), whilst gross premium income from other sources will continue to grow (15 percent growth expected in 2004) according to plans. Since acquiring an account of power plant business from an Alstom captive in 2003, Infrassure has expanded its business model into other areas of engineering insurance (57.2 percent of gross premiums written at year-end 2003). Infrassure has an exclusivity agreement that would survive a change in ownership/structure of Alstom, but it remains focused on successfully diversifying its business mix and reducing its dependence upon one client.”
Best also indicated that it “expects Infrassure to report good profits at year-end 2004 as a result of disciplined underwriting and the continued strong rating environment in classes such as Erection All Risks. The company actively seeks to alter its business mix to focus on classes where market conditions are more favourable.” It also sees the company’s underwriting performance improving in 2004.
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