Best Affirms Lloyd’s Syndicates 609, 570 (Atrium/Ariel) ‘A’ Ratings
A.M. Best Co. has affirmed the Best’s Syndicate Rating of ‘A’ (Excellent) and issuer credit rating (ICR) of “a+” of Lloyd’s Syndicates 609 and 570, both of which are managed by Atrium Underwriters Limited (AUL). The outlook for both ratings remains stable.
In separate bulletins Best explained that the “ratings reflect the financial flexibility provided by Bermuda-based Ariel Holdings, Ltd., the ultimate holding company of AUL, in addition to the underlying strength of the Lloyd’s market.” Both Syndicates are also “expected to benefit from Ariel’s catastrophe modeling experience,” particularly in the underwriting of its non-marine property business and property catastrophe business.
Best expects Syndicate 609’s 2009 year of account to show a reduction in its stamp capacity to £200 million ($294.6 million), down from £215 million [$316.7 million] for the 2008 year of account. This is due, Best noted, “to anticipated rate weakening for some of its lines of business. In its original business plan, the syndicate incorporated a reduction in capacity to £175 million ($258 million), but hurricanes Gustav and Ike led to a positive reassessment of likely market conditions in certain catastrophe exposed classes.
“The syndicate’s capacity for the 2008 and 2009 years of account is provided by Atrium’s corporate Lloyd’s member, Atrium 5 Limited (25 percent) and third party capital providers, largely traditional Lloyd’s Names (75 percent). The Atrium funds at Lloyd’s requirements for the 2008 and 2009 years of account are met by letters of credit guaranteed by Ariel Holdings and Ariel Reinsurance Company Ltd.”
Best said it expects Syndicate 570’s 2009 year of account to have an unchanged stamp capacity of £125 million ($184 million), “although total gross premiums will be reduced from planned levels if rate deterioration continues for the syndicate’s main lines of business.
“The syndicate’s capacity for the 2008 and 2009 years of account is provided by Atrium’s corporate Lloyd’s member, Atrium 5 Limited (25 percent) and third party capital providers, largely traditional Lloyd’s Names (75 percent). The Atrium funds at Lloyd’s requirements for the 2008 and 2009 years of account are met by letters of credit guaranteed by Ariel Holdings and Ariel Reinsurance Company Ltd.”
Best also said that it believes Syndicate 609 could experience some “rate deterioration and losses from hurricanes Gustav and Ike in 2008,” which will lead to “an increase in syndicate 609’s combined ratio on an annually accounted basis from the 78 percent reported in 2007.” The syndicate’s total gross losses from hurricanes Gustav and Ike are expected to be approximately $52 million ($35 million on a net basis).
Best also indicated that “despite current market volatility,” it expects “a solid net investment yield of approximately 3 percent in 2008 (down from 5.2 percent in 2007), reflecting the syndicate’s conservative investment strategy. Rating conditions were attractive for the syndicate’s 2006 and 2007 underwriting years, particularly for its catastrophe exposed lines of business, where rates improved following the 2005 hurricanes.”
Syndicate 570’s exposure to Ike and Gustav is around $4 million. Best said there could also be some “rate weakening in 2008,” which “is likely to lead to some increase in the syndicate’s year-end combined ratio from the 97 percent reported in 2007 on an annually accounted basis.”
Best anticipates a solid net investment yield of approximately 3 percent at year-end 2008 (down from 5 percent at year-end 2007), despite the current “volatile markets.” The anticipated result reflects the “syndicate’s conservative investment strategy,” said Best. “For the 2006 and 2007 underwriting years of account, the syndicate benefited from attractive rating conditions for its property catastrophe reinsurance business, in addition to benign hurricane loss experience.”
Best indicated that “syndicate 609 benefits from writing a well-diversified portfolio and continues to maintain a strong profile in a number of specialist areas, which include aviation war, marine war and marine total loss business. The syndicate’s profile is further enhanced by its underwriting expertise in a wide range of other business classes.”
Best also said it believes that Syndicate 570 “occupies an excellent position within the Lloyd’s market as a specialist underwriter of small to medium-sized commercial business, primarily emanating from the United States. The syndicate’s profile is likely to be enhanced in 2008-2009 by further additions to its AUGold range of internet-based products.”
Source: A.M. Best – www.ambest.com