Ratings Recap: Lloyd’s Syndicate 958, Custodian and Allied

A.M. Best Europe – Rating Services Ltd. has affirmed the financial strength rating of ‘A’ (Excellent) and issuer credit rating of “a+” of Lloyd’s Syndicate 958, both with stable outlooks. Best has also withdrawn the ratings in response to management’s request to no longer participate in its interactive rating process. Syndicate 958 was managed by Omega Underwriting Agents Limited, a wholly owned subsidiary of Bermuda-based Omega Insurance Holdings Limited. In August 2012 Omega was acquired by Canopius Group Limited, which is based on Guernsey. The syndicate is accordingly now managed by Canopius Managing Agents Limited, a wholly owned subsidiary of Canopius. Best said the ratings of Lloyd’s Syndicate 958 reflect the “financial strength of the Lloyd’s market, which underpins the security of all Lloyd’s syndicates. In addition, syndicate 958 benefits from the financial flexibility provided by Canopius and by external members, who support 38.9 percent of the syndicate’s capacity for its 2013 year of account. Flectat Limited, Canopius’ corporate member at Lloyd’s, provides 61.1 percent of the capacity, and Canopius Reinsurance Limited, the former Omega Specialty Insurance Company Limited (Bermuda), underwrites a 20 percent quota share of the syndicate.” In addition Best noted that the syndicate’s operating performance “was badly affected by the exceptional series of natural and man-made catastrophes in 2010 and 2011, with losses of £6 million [$9.186 million] and £52 million [$79.62 million], respectively, recorded on an annually accounted basis. This trend was expected to be reversed in 2012, but losses from Superstorm Sandy and other US weather events, together with strengthening of long-tail liability and New Zealand earthquake reserves meant that weak operating performance continued and was reported in 2012.” On a more positive note, Best indicated that “Syndicate 958 has a good business profile within the London market as a specialist underwriter of short-tail, small to medium-sized property risks, predominantly located in the United States.”

A.M. Best Europe – Rating Services Limited has placed the financial strength rating of ‘B’ (Fair) and issuer credit rating of “bb” of Nigeria’s Custodian and Allied Insurance Plc under review with negative implications. The rating actions “follow the recent announcement on April 10, 2012, that Custodian has completed its merger with Crusader Nigeria Plc, a life and pensions insurer domiciled in Nigeria,” Best explained. The rating agency said it is “currently reviewing the impact of this transaction on the rating fundamentals of Custodian, due to the absence of information available to support the review.” Best also noted that it had “previously cited Custodian’s rapid growth plans—specifically in relation to its oil and gas business segment—its weak enterprise risk management and the uncertainty relating to the adequacy of its reserves as negative rating factors. Given these negative rating drivers, the merger creates further uncertainty as to Custodian’s ability to successfully integrate the new portfolio of life and pensions risks within its operation.” In conclusion Best said: “The ratings of Custodian will remain under review with negative implications while Best evaluates the impact of the transaction on the company’s rating fundamentals, including the impact on its risk-adjusted capitalization, prospective performance and business strategy.” Best expects to resolve the under review status no later than October 2013. The report added that “positive rating actions are unlikely in the near term. Factors that could lead to negative rating actions for Custodian include a deterioration in its risk-adjusted capitalization and a perception that the company is exposed to high integration risk. Negative rating actions could also occur if A.M. Best is unable to receive sufficient information to support its assessment.

Topics Lloyd's