Best Europe Affirms Hiscox and Subs Ratings

December 5, 2013

A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating (FSR) of ‘A’ (Excellent) and issuer credit ratings (ICR) of “a+” of Hiscox Insurance Company (Bermuda) Limited, UK-based Hiscox Insurance Company Limited (Hisco) and Hiscox Insurance Company (Guernsey) Limited.

Best also affirmed the ICR of “bbb+” of Hiscox Ltd (Hiscox) (Bermuda), the ultimate parent holding company of the Hiscox group of companies. The outlook for the above ratings is stable.

In addition Best affirmed the FSR of ‘A’ (Excellent) and ICR of “a+” of Lloyd’s Syndicate 33, which is managed by Hiscox Syndicates Limited (HSL). The outlook for both ratings remains positive.

At the same time Best affirmed the FSR of ‘A’ (Excellent) and ICR of “a+” of Hiscox Insurance Company, Inc. (HICI), which is based in Chicago, Illinois, both with stable outlooks.

The ratings of Hiscox, Hiscox Bermuda and Hisco “reflect the Hiscox group’s strong consolidated risk-adjusted capitalization and robust performance record, as demonstrated by an average five-year combined ratio of 90 percent,” Best explained; noting that “Hiscox pursues a successful strategy of balancing volatile international catastrophe business with more stable local specialist business, which has supported its profitable performance in each of the last five years.”

As a partial offsetting factor Best cited “the group’s significant exposure to catastrophe losses, through its property reinsurance account in particular.”

Best said the “ratings of Hiscox Bermuda and Hisco factor the strategic importance of both companies to the Hiscox group. Each company has established a track record of good operating performance and has made a positive contribution to overall earnings during the last five years.

“The ratings of Hiscox Bermuda are extended to Hiscox Guernsey, which cedes the majority of its premiums to Hiscox Bermuda. The ratings of Hiscox Bermuda are also extended to HICI due to its role in and strategic importance to the Hiscox group. HICI receives explicit support from Hiscox Bermuda in the form of quota share reinsurance.

“The affirmation of the ratings of Lloyd’s Syndicate 33 reflects the underlying strength of the Lloyd’s market, as well as the syndicate’s strong performance record and enhanced financial flexibility from the support of Hiscox, which provides 72.5 percent of the syndicate’s capacity through its corporate member.”

Best indicated, however, that a “factor that may lead to positive or negative rating actions for the syndicate is a change in the ratings of Lloyd’s, which currently has an FSR of ‘A’ (Excellent) and an ICR of “a+”, both of which have a positive outlook.”

In addition Best said a “sustained strong performance and strong consolidated risk-adjusted capitalization could put positive pressure on the ratings of the Hiscox entities over the longer term. However, significant erosion of capital or prolonged weak performance could put negative pressure on the ratings.”

Source: A.M. Best Europe

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