AM Best Revises Outlooks to Positive for FAIR Oil & Energy Insurance Syndicate
May 16 2024 - 12:21PM
Business Wire
AM Best has revised the outlooks to positive from stable
and affirmed the Financial Strength Rating of B+ (Good) and the
Long-Term Issuer Credit Rating of “bbb-” (Good) of FAIR Oil &
Energy Insurance Syndicate (the Syndicate) (Bahrain).
The ratings reflect the Syndicate’s balance sheet strength,
which AM Best assesses as strong, as well as its adequate operating
performance, neutral business profile and appropriate enterprise
risk management.
The positive outlooks reflect ongoing improvements in the
resilience of the Syndicate’s balance sheet. Management has taken
action to improve the quality of the reinsurance programme,
resulting in higher credit quality of receivables. Retained
earnings due to strong underwriting margins since 2021 have
resulted in growth in the Syndicate’s capital base and
risk-adjusted capitalisation.
The Syndicate is one of four reinsurance vehicles formed by the
Federation of Afro-Asian Insurers and Reinsurers (FAIR), with a
remit to write energy business. The Syndicate’s members are drawn
from participants of FAIR, who subscribe to the Syndicate’s units
of capacity. Whilst unique in its legal structure, the Syndicate
operates like a traditional reinsurer, providing capacity and
expertise to its cedants.
The Syndicate’s balance sheet strength is underpinned by its
risk-adjusted capitalisation, as measured by Best’s Capital
Adequacy Ratio (BCAR), which is assessed at the strongest level.
Given the Syndicate’s relatively small capital base, prospective
risk-adjusted capitalisation is susceptible to volatility due to
potential exposure to large net losses. The balance sheet strength
benefits from a conservative investment portfolio by asset class
and a prudent reserving strategy.
The Syndicate demonstrated adequate profit generation between
2018 and 2022, with a weighted average combined ratio of 97.8%,
negatively affected by weak performance in 2019 when it reported a
combined ratio of 171.1% and a net loss of USD 3.9 million. The
Syndicate subsequently returned to profitability, as demonstrated
by combined ratios for 2022 and 2021 of 67.0% and 80.7%,
respectively. Preliminary results for 2023 show continued positive
earnings, with a net profit of USD 4.9 million (2022: USD 3.8
million), driven by an improved loss ratio. Operating profits are
driven by technical earnings and are augmented by marginal but
stable returns from investment activities.
Although limited in size, the Syndicate benefits from a
defendable niche business profile. The generally stable member base
provides the Syndicate with good access to energy risks across the
Afro-Asian territories, supplemented by business written through
the open market across the region. Whilst the Syndicate is
concentrated heavily by line of business, it benefits from
diversification through the geographical spread of its
business.
This press release relates to Credit Ratings that have been
published on AM Best’s website. For all rating information relating
to the release and pertinent disclosures, including details of the
office responsible for issuing each of the individual ratings
referenced in this release, please see AM Best’s Recent
Rating Activity web page. For additional information
regarding the use and limitations of Credit Rating opinions, please
view Guide to Best’s Credit Ratings. For information
on the proper use of Best’s Credit Ratings, Best’s Performance
Assessments, Best’s Preliminary Credit Assessments and AM Best
press releases, please view Guide to Proper Use of Best’s
Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and
data analytics provider specialising in the insurance industry.
Headquartered in the United States, the company does business in
over 100 countries with regional offices in London,
Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more
information, visit www.ambest.com.
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6264 anna.sheremeteva@ambest.com
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