All safe in the Ark
AM Best has affirmed its ratings of Bermuda-based Group Ark Insurance Limited (GAIL). It confirmed its A (Excellent) financial strength rating and the long-term issuer credit rating of “a” (Excellent). It also affirmed the long-term issue credit ratings (Long-Term IR) on GAIL’s outstanding rated instruments and gave them a stable outlook.
“The ratings reflect Ark’s consolidated balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM). In addition, the ratings reflect GAIL’s strategic importance to [parent] Ark, as the group’s Bermuda-based re/insurance vehicle,” Best stated.
GAIL provides reinsurance to Ark’s corporate member at Lloyd’s and started writing third-party re/insurance business this year.
“The very strong balance sheet strength assessment reflects Ark’s consolidated risk-adjusted capitalisation, which is projected to remain at the strongest level over the five-year business plan period, as measured by Best’s Capital Adequacy Ratio (BCAR),” the ratings agency’s analysis added.
The decision to start writing third party business is part of Ark’s strategy of scaling up its Lloyd’s platform. It is supported by $605 million of capital from White Mountains Insurance Group, which took a majority stake in Ark in January 2021, and the issuance of $164m of subordinated debt during the year. Ark is exposed to “material catastrophe risk”, Best adds, partially offsetting this, but that is expected to be managed through reinsurance and “robust exposure management”.
“The adequate operating performance assessment considers the group’s five-year business plan, and Ark’s robust underwriting performance track record at Lloyd’s. AM Best expects Ark to maintain good technical return metrics over the underwriting cycle, notwithstanding the execution risk associated with its continued scale up. Ark reported a combined ratio of 95.4% for the first nine months of 2021, which is expected to improve as rate increases on the 2021 year-of-account earn through,” the analysis concludes.
