A.M. Best Affirms Credit Ratings of The West of England Ship Owners Mutual Insurance Association
A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of The West of England Ship Owners Mutual Insurance Association (WoE or the Club) (Luxembourg). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect WoE’s balance sheet strength, which A.M. Best categorises as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
WoE’s balance sheet strength is underpinned by risk-adjusted capitalisation being maintained at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Free reserves have grown by an annual compound rate of approximately 12% over the past five policy years (2013-2017), as a result of full retention of net surpluses. The Club’s ability to make additional calls on members provides some financial flexibility. However, making such unbudgeted calls is considered to have a negative impact on the club’s business profile, with calls made only in extreme circumstances.
For the year ending February 2017, solid operating results were supported by an underwriting surplus well-above budget expectations, resulting in a combined ratio of 87.2% (2016: 83.6%). Volatility has historically resulted from changes in the market value of equities and foreign exchange movements. A.M. Best expects a small underwriting loss in the year-ending February 2018 and close-to-break even technical results in subsequent periods, in line with the Club’s performance target.
The Club has a niche business profile insuring ship-owners and charterers against third party liability, and benefits from the membership of the International Group of P&I Clubs. WoE has a well-diversified portfolio by type of vessel and a good geographical distribution of tonnage underwritten. Continued negative pressure on premium rates is likely to offset prospective growth derived from new vessels insured.
The Club’s risk management capabilities are considered as appropriately aligned with its risk profile. In particular, the risk management framework benefits from the stringent controls introduced as part of Solvency II implementation.
Source: A.M. Best