A.M. Best Co. announced that it has affirmed the financial strength rating of “B++” (Very Good) and the issuer credit rating (ICR) of “bbb” of the Isle of Man-based Western Isles Insurance Company Limited (WIICL) with a stable outlook.
“The ratings reflect WIICL’s solid risk-adjusted capitalization and strong operating performance. An offsetting factor is the business dependence on a limited source of insurance premiums and lack of diversification by line of business,” said Best.
The rating agency said it “believes WIICL’s capital position will remain solid, on a risk-adjusted basis, during the next two years. This factors one-off significant growth in net written premium (anticipated to be approximately 48 percent) in 2005 due to the increased marine cargo activity in 2005 and continuing substantial dividend payments (approximately 70 percent of post-tax profit) to the parent company, Soglassye Insurance Company LLC (Soglassye).”
Best also “expects WIICL’s loss ratio at year-end 2006 and 2007 to remain below 5 percent, consistent with the anticipated 1.5 percent in 2005. This is expected to result from the company’s low retention per risk and the absence of large claims from its marine cargo portfolio, which is exposed to high severity but low frequency losses. A.M. Best forecasts that the company’s operating expense ratio is likely to increase to approximately 5 percent-10 percent in 2006-07 (compared to the anticipated 3.4 percent in 2005) due to increasing commissions paid to acquire business.”
Explaining WIICL’s business profile, Best noted that it “is limited as it mainly reinsures risks emanating from Soglassye, and its portfolio consists mainly of marine cargo (shipping of non-ferrous metal) expected to account for approximately 97 percent of gross written premium in 2006. A.M. Best expects the premium income to increase by approximately 10 percent in 2006 due to increasing prices of non-ferrous metal.”
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