A.M. Best Revises Issuer Credit Rating Outlook of Nuclear Electric Insurance Ltd.
OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has revised the outlook to negative from stable and affirmed the issuer credit rating of "a+" as well as the financial strength rating (FSR) of A (Excellent) of Nuclear Electric Insurance Ltd. (NEIL) (Wilmington, DE). The outlook for the FSR is stable.
The ratings reflect NEIL's very strong capital position, conservative operating strategy, strong enterprise risk management (ERM) culture and exclusive leadership position in the U.S. nuclear power generating industry. NEIL provides essentially 100% of the nuclear utility property insurance coverage in the United States.
Partially offsetting these positive rating factors are the company's primary focus on catastrophic property risks and related business interruption claims, as well as the financial stress this could cause in the unlikely event of two full-limit losses.
The negative outlook on the ICR considers the magnitude of recent claims activity and the concerns this activity brings to the ERM exposures. The company has implemented changes to its risk management, coverage for high risk perils and pricing models; however, in A.M. Best's view it will take time for these measures to be fully tested.
The ratings recognize NEIL's history of maintaining sufficient capital to support its ongoing obligations, which include its financial flexibility to suspend policyholder distributions. NEIL also has the contractual right to assess a retrospective premium for 10 times each member's annualized premium, which enhances the company's financial flexibility.
An offsetting rating factor is the company's reliance on one market and two principal product lines as well as its earnings volatility. However, these factors are reflective of a captive insurer focused on a particular niche market supported by its members.
A.M. Best is unlikely to upgrade NEIL's ratings over the long term due to volatile earnings and its limited market profile.
Key rating triggers that could lead to a downgrading of the company's ratings over the longer term include increased leverage, substantial increases in losses and a significant erosion of capital or loss of members.
A.M. Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated in the United States and throughout the world.
For current Best's Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.
The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
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