A.M. Best Europe – Rating Services Limited has placed the financial strength rating (FSR) of ‘A-‘ (Excellent) and issuer credit rating (ICR) of “a-” of Bermuda-based Omega Specialty Insurance Company Limited (OSIL) and the ICR of “bbb” of Omega Insurance Holdings Limited under review with negative implications.
However, Best also stated that the FSR of ‘A’ (Excellent) and ICR of “a+” of Lloyd’s Syndicate 958, which is managed by Omega Underwriting Agents Limited (OUAL), “remain unchanged at the Lloyd’s market level.”
Best explained that the rating actions on OSIL and Omega reflect its “concerns about the group’s exposure management.” The action follows the announcement by Omega of a consolidated pre-tax loss for 2010 of $42.9 million, compared to a $47.1 million profit in 2009, “which,” Best continued, is “a materially weaker performance” than the rating agency had expected.
As a consequence of the loss, “consolidated risk-adjusted capitalization has deteriorated to a level below that previously anticipated, although it remained excellent at year-end 2010.”
Best also noted that it continues to “discuss its concerns with Omega’s management team. Outstanding issues relate to the group’s risk management processes, the level of uncertainty in respect of the group’s exposure to catastrophe events in 2011 to date and the ongoing placement of the 2011 reinsurance program. Additional uncertainty is introduced by the review by the group’s directors of approaches that may lead to an offer to acquire Omega.”
Best expects to resolve the under review status following a more extensive analysis of catastrophe losses in the first quarter of 2011 and the impact of recent management actions on the group’s prospective risk-adjusted capitalization and risk management standards, in particular those relating to exposure management.
Source: A.M. Best
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