S&P Affirms Norwegian Hull Club ‘A’ Ratings

Standard & Poor’s has affirmed its ‘A’ long-term counterparty credit and insurer financial strength ratings on Bergen-based mutual marine insurer Norwegian Hull Club (NHC), following a review. The outlook is stable.

“The ratings reflect NHC’s very strong capital, good historical operating performance, and strong business position,” said Standard & Poor’s credit analyst Paul Oates. “These positive factors are offset by NHC’s dependence on the cyclical marine insurance market and recent weak underwriting results.”

NHC, which writes marine hull insurance for domestic and international shipping companies, was formed from the merger of Bergens Skibsassuranseforening-Gjensidig and Unitas Gjensidig Assuranseforening on Jan. 1, 2001.

The stable outlook reflects the significant and continued improvement in marine insurance rates in 2003, and the expectation that rates will continue to improve until at least 2005. Any sign of weakening in these rate improvements or fundamental shifts in loss frequency could adversely affect the ratings on NHC.

Despite large losses in 2002, Standard & Poor’s expects NHC to show significant improvement in operating performance during 2003 and beyond. NHC’s excess capital allows it to absorb the somewhat volatile performance resulting from the lack of diversity in business lines.

NHC’s business position is expected to remain strong, although significant growth in market share is not expected as the club focuses on profitable underwriting.

Risk-based capitalization will remain extremely strong, with capital adequacy as measured by Standard & Poor’s risk-based capital model of more than 350 percent. NHC will continue to be supported by its existing reinsurers.

Operating performance will improve, with a break-even result expected for 2003 and a combined ratio that should further strengthen to about 100 percent from 128 percent.