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14 October 2024News

Somers Group A rating affirmed

The operating subsidiaries of Arch Capital-owned Somers Group have had their A financial strength ratings affirmed by KBRA.

The ratings agency said the Bermuda-based company, bought by Arch Capital and its investment partners in 2021 had produced a strong underwriting performance and it had also derisked its investment portfolio.

The ratings of Watford Insurance Company Europe Limited, Watford Specialty Insurance Company and Axeria IARD reflected the group’s continued improvement in risk-based capitalisation, strong and evolving enterprise risk management framework, strong liquidity profile, very manageable financial leverage, as well as strong drivers of profitability with consistent underwriting profitability beginning to emerge, KBRA said.

"At the end of 2023, Somers Group’s Bermuda Solvency Capital Requirement (BSCR) coverage ratio was 186% (2022:150%; 2021:135%) while Somers Re’s BSCR coverage ratio was 186% (2022: 150%; 2021: 141%)," the agency said. "The improvement in the BSCR coverage ratios was driven by the growth in available capital significantly exceeding the growth in premium and reserve risk as well as ongoing derisking of the investment portfolio.

"Across the organisation, Somers Group has robust risk management processes and procedures. With the onboarding of a Chief Risk Officer in July 2024, the entire risk management framework will be reviewed and enhanced to ensure it remains appropriate for the evolving risk profile of Somers Group. Through the end of 2023, Somers Re has maintained strong liquidity and has benefited from increased operating cash flows over the past three years. Somers Group’s debt/capital was 17.5% at the end of 2023, down from 23.4% at the end of 2022."

It noted that Somers had a combined ratio of 95.2% for 2023 and it had reduced its exposure to non-investment grade fixed income securities from 37% in 2022 to 20% in 2023, and expected to reduced it to less than 10%. 

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