Best Affirms Lloyd’s Syndicate 382 Ratings & Hardy Underwriting

A.M. Best Co. has affirmed the Best’s Syndicate Rating of ‘A’ (Excellent) and the issuer credit rating (ICR) of “a+” of Lloyd’s Syndicate 382, which is managed by Hardy Underwriting Agencies Ltd (HUA).

Best also affirmed the ICRs of “bbb” of Hardy Underwriting Bermuda Limited, the ultimate holding company of the Hardy group of companies, and of the UK-based Hardy Underwriting Group plc, the immediate holding company of HUA, as well as the debt rating of “bbb-” on the $30 million floating rate subordinated bonds issued by Hardy Group. The outlook for all ratings remains stable.

“Syndicate 382’s financial flexibility continues to benefit from the support of Hardy Bermuda, which owns 100 percent of its capacity and raised £40 million [$62.75 million] of new share capital to support the syndicate’s underwriting in March 2009,” Best explained.

“The syndicate’s capacity has increased to £300 million [$470.7 million] for the 2010 year of account (2009: £250 million [$392 million]), in anticipation of growth from new and existing business lines. Hardy Bermuda’s funds at Lloyd’s requirements for the 2010 year are met by partial utilization of its $82 million letter of credit facility. The ratings of syndicate 382 also reflect the financial strength of the Lloyd’s market, which underpins the security of all Lloyd’s syndicates.”

Best also noted that “rate strengthening for the syndicate’s catastrophe-exposed property business and benign weather-related claims experience are likely to result in a decrease in its combined ratio for 2009 on an annually accounted basis from 93 percent in 2008. A solid investment return is anticipated, albeit lower than the 4 percent reported in 2008. The syndicate’s conservative strategy of holding only high quality bonds and cash supports stable investment performance. Prospective underwriting performance is expected to be more volatile due to growth of the syndicate’s property treaty portfolio, following the merger with specialist property syndicate 3820 on 1 January, 2009. However, the syndicate’s prudent approach to pricing and management of catastrophe exposure is likely to support good technical performance.”

Best pointed out that “Syndicate 382 maintains a good business profile within the Lloyd’s market as a specialist underwriter of aviation, marine and property business. The portfolio is well-diversified by geographic region. The majority of business is underwritten in North America (approximately 20 percent of gross premiums written), the UK and Western Europe.

“Geographic diversification is likely to benefit from the formation in October 2009 of Hardy Arig Insurance Management (HAIM), which is jointly owned by Hardy Bermuda and Arab Insurance Group (B.S.C.). HAIM underwrites construction, engineering and onshore energy business in the Middle East and North Africa on a delegated authority basis.”

Source: A.M. Best – www.ambest.com