LONDON–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating of A-
(Excellent) and the Long-Term Issuer Credit Rating of “a-” of The United
Kingdom Mutual War Risks Association Ltd. (UK War Risks or the Club)
(United Kingdom). The outlook of these Credit Ratings (ratings) remains
stable.
The ratings reflect UK War Risks’ balance sheet strength, which AM Best
categorises as very strong, as well as its adequate operating
performance, limited business profile and appropriate enterprise risk
management.
UK War Risks’ balance sheet strength is underpinned by risk-adjusted
capitalisation that is at the strongest level, as measured by Best’s
Capital Adequacy Ratio (BCAR). Offsetting balance sheet strength factors
include the Club’s small capital base and its material dependence on
reinsurance. UK War Risks cedes almost all of its underwriting risk to
third-party reinsurers, retaining only a small deductible on one part of
its reinsurance programme. Counterparty credit risk is somewhat
mitigated by the diversity and excellent credit quality of its
reinsurers.
UK War Risks has an adequate, albeit volatile, earnings record, with a
five-year average return on equity of 2.6% (February 2015- February
2019). Operating results are dependent on investment earnings, which
have been volatile due to the Club’s significant exposure to equity
markets. Technical results largely reflect the Club’s ability to charge
sufficient premium to cover its operating expenses, as almost all claims
are covered by reinsurance. Consequently, the non-renewal of a large
member could lead to a sharp decline in technical earnings, due to a
fall in premium income without an offsetting reduction in management
expenses.
The Club has an established business profile as a specialist underwriter
of war risk insurance for ships. However, the Club’s business profile is
limited due to its relatively small size, concentrated membership base
and focus on a small underwriting niche.
This press release relates to Credit Ratings that have been published
on AM Best’s website. For all rating information relating to the release
and pertinent disclosures, including details of the office responsible
for issuing each of the individual ratings referenced in this release,
please see AM Best’s Recent
Rating Activity web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view Understanding
Best’s Credit Ratings. For information on the proper media
use of Best’s Credit Ratings and AM Best press releases, please view Guide
for Media – Proper Use of Best’s Credit Ratings and AM Best Rating
Action Press Releases.
AM Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit www.ambest.com
for more information.
Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.
Contacts
Luca Patron
Financial Analyst
+44 20 7397 0304
[email protected]
Tim Prince
Director, Analytics
+44 20 7397 0320
[email protected]
Christopher Sharkey
Manager, Public Relations
+1 908 439
2200, ext. 5159
[email protected]
Jim Peavy
Director, Public Relations
+1 908 439 2200, ext.
5644
[email protected]
