Best Affirms Markel Int. ‘A-‘ Ratings

A.M. Best Co. has affirmed the financial strength rating of “A-” (Excellent) and the issuer credit rating of “a-” of U.K.-based Markel International Insurance Company Limited (MIICL) with a stable outlook.

Best said that it anticipates that in 2006 and 2007 “MIICL will maintain excellent risk-adjusted capitalization as a result of positive after-tax earnings and further commutation of existing liabilities.” Best also said it “believes MIICL’s financial flexibility is enhanced by its U.S. parent, Markel Corporation, which has contributed capital of over $184 million over the last three years.”

Best forecasts “a strengthening performance in 2006, with after-tax profits expected to rise to approximately $ 17 million, in the absence of exceptional hurricane activity and material reserve strengthening. Despite catastrophe losses, MIICL produced an after-tax profit of $11 million in 2005, owing to a robust investment performance.”

The rating agency further noted: “MIICL has a good business position as a specialist underwriter of professional liability and property insurance in the U.K. and London market. A.M. Best forecasts a small rise in gross premium income in 2006 due to rate increases on marine, property and reinsurance business following 2005 hurricane experience.

“The rise will be partially offset by lower premium income from U.K. retail and professional indemnity business, as the company cuts back on risks where rating conditions are less favorable. In response to higher levels of competition in the United Kingdom, MIICL has increased the amount of international professional liability business that it writes, supported by the formation of a branch office in Spain (Markel International España S.A.) in 2005.

“The main offsetting factor continues to be the potential for further reserve deterioration relating to discontinued U.S. casualty business. A.M. Best recognizes that the company has made significant progress addressing its prior year reserves, having completed a number of commutations (30 percent of asbestos exposures commuted during 2005). However, there remains a high element of inherent uncertainty relating to the adequacy of these reserves. A.M. Best will continue to closely monitor the development of MIICL’s prior year liabilities.”