Ratings Roundup: Inter-Industry, Western Isles, PARIS RE, Fairfax, AmerInst, Omega, Lloyd’s Syndicate 958

A.M. Best Co. has affirmed the financial strength rating of ‘B+’ (Good) and the issuer credit rating of “bbb-” of Inter-Industry Insurance Company Limited (III), which is based on the Isle of Man, and its wholly owned subsidiary, Insurco Ltd. The outlook on both ratings has been revised to negative from stable. Best said “the negative outlook reflects the company’s current and prospective deterioration in operating performance driven by weakening underwriting results, combined with a gradual reduction in premiums written over the past five years. Offsetting factors are its solid capital position and niche business profile.” Best also said it believes “the continued reduction in premium volumes, with an increase in claims frequency and higher expense ratio is anticipated to keep the combined ratio above 100 percent in the short to medium term.”

A.M. Best Co. has affirmed the financial strength rating of ‘B+’ (Good) and issuer credit rating of “bbb-” of the Isle of Man-based Western Isles Insurance Company Limited (WIICL) with a negative outlook. “The ratings reflect WIICL’s solid projected risk-adjusted capitalization, good operating performance and improving business profile,” said Best. “An offsetting factor is the weak capital position of the parent company, Soglassye Insurance Company LLC, a general Russian insurer. WIICL’s capital position is prospectively expected to remain strong,” Best continued, “despite growth in net written premiums of 75 percent. The company has developed its profile through increasing third party business volumes from Russia, for which WIICL is expected to have low retentions levels.

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A-‘ (Excellent) and the issuer credit rating (ICR) of “a-” of PARIS RE S.A. and its operating companies. Best also affirmed the ICR of “bbb-” of Swiss-based PARIS RE Holdings Limited, the ultimate parent company of the group, and has revised the outlook on all of the ratings to positive from stable. Best also withdrew the FSR of ‘A-‘ (Excellent) and the ICR of “a-” of PARIS RE Bermuda Limited due to the transfer of the operational activities to PARIS RE Switzerland AG. The current rating is now category NR-5 (Not Formally Followed). “The ratings of PARIS RE reflect its strong consolidated capitalization, continuously robust underwriting results and an experienced management team,” said Best. “An offsetting factor is the challenging market environment in which PARIS RE operates. Best explained that the positive outlook reflects its opinion “that an upgrade could be considered if PARIS RE continues its disciplined underwriting strategy throughout 2008 and at the 2009 renewals.”

Fitch Ratings has upgraded the ratings of Fairfax Financial Holdings Limited as follows: Issuer Default Rating (IDR) to ‘BBB-‘ from ‘BB+’; Senior debt to ‘BB+’ from ‘BB’. Fitch also affirmed the ratings of Fairfax’s wholly and partially owned subsidiaries. The outlook on the ratings is stable. Fitch said its “upgrade of Fairfax’s IDR and debt ratings reflects the holding company’s reduced financial leverage, increased cash position, favorable interest coverage and stable runoff operations. The ratings of Fairfax’s operating companies continue to reflect its improved operating performance and underwriting discipline. Partially offsetting these positives are the potential for additional adverse reserve development, particularly on older accident years and in runoff operations and anticipated challenges in the current soft property/casualty market environment.”

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A-‘ (Excellent) and issuer credit rating (ICR) of “a-” of the Bermuda-based AmerInst Insurance Group, Ltd. – both with stable outlooks. “These ratings reflect AmerInst’s conservative reserve position, its niche expertise as a reinsurer of professional liability policies and adequate capitalization,” Best explained. “AmerInst has a history of reserve adequacy and has grown its premium volume over a five-year period, while maintaining conservative underwriting leverage. Partially offsetting these positive rating factors are the company’s narrow spread of underwriting risk and high investment leverage. Nonetheless, AmerInst’s common stock portfolio was the source of significant realized gains since 2004.”

A.M. Best Co. has affirmed the financial strength rating of ‘A-‘ (Excellent) and issuer credit rating (ICR) of “a-” of Bermuda-based Omega Specialty Insurance Company Limited (OSIL) with a stable outlook. Best said that in its opinion, “OSIL’s risk-adjusted capitalization is likely to remain excellent in 2008 and 2009, supported by increasing retained earnings. Additionally, OSIL benefits from the financial flexibility of its parent, Omega Insurance Holdings Limited (OIH), which has demonstrated its ability to raise funds to support the group’s growth. OSIL’s financial flexibility is further enhanced by a comprehensive reinsurance program that limits its exposure to major losses.” Pretax profits are expected to be in the £45 million ($88.9 million) range, achieved in 2007, “despite deteriorating premium rates in a number of the company’s business lines. The increase in profit is likely to be driven by premium growth in business derived from outside the Omega group and OSIL’s new 50 percent whole account quota share reinsurance of Omega US Insurance, Inc (a wholly owned surplus lines subsidiary of OIH), which is likely to represent 10 percent of OSIL’s gross written premium in 2008.”

A.M. Best Co. has affirmed its Syndicate Rating of ‘A’ (Excellent) and issuer credit rating (ICR) of “a+” of Lloyd’s Syndicate 958, which is managed by Omega Underwriting Agents Limited (OUAL). Best also affirmed the “bbb” ICR of Bermuda’s Omega Insurance Holdings Limited (OIH), and has revised the outlook on the syndicate’s ratings to stable from positive, “to bring the outlook in line with the outlook on the ratings of Lloyd’s of London,” Best indicated. “This action is also reflected in a revision in the outlook for the OIH rating to stable from positive.” Best explained that the “ratings reflect the financial strength of the Lloyd’s market, which underpins the security of all Lloyd’s syndicates.” Best also said it “believes that syndicate 958 benefits from the financial flexibility provided by its parent company OIH and Omega group’s excellent consolidated risk-adjusted capitalization in 2008. The syndicate has reduced its underwriting capacity to £249 million [$491.7 million] in 2008 from £275 million [$543 million] the previous year in response to deteriorating market conditions. The reduction was effected by non-renewing a 10 percent qualifying quota share with Omega Specialty Insurance Company Limited (OSIL). The syndicate continues to benefit from a 20 percent whole account quota share reinsurance arrangement with OSIL.”