AM Best awards stable outlook to Custodian & Allied Insurance

A.M. Best Rating Services has awarded a bb+ Stable outlook to Custodian and Allied Insurance Limited in the current year after an independent analysis of its operations.

According to AM Best, “the stable outlook reflects AM Best’s view that the balance sheet strength is expected to remain underpinned by the strongest level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR). Over time, increasing capital requirements stemming from strong business growth are likely to be adequately supported by retained earnings, bolstered by the company’s robust underwriting profitability.”

With excellent liquidity as a result of cash and equivalents comfortably covering net insurance liabilities, the rating agency pointed out that the insurance firm has moderate exposure to local equities and real estate, which account for approximately one-fifth of invested assets, even as it has a high reliance on reinsurance, primarily for the oil and energy line of business.

On the operating performance of the insurer which the rating agency rated strong, it stressed that it’s good and improving overall earnings that significantly exceed inflation are underpinned by robust underwriting profitability and investment income, as operating performance is expected to remain strong over the medium term.

Regarding the enterprise risk management of the company, the report further states that “internal risk management expertise has improved in recent years. There is an ongoing process of risk identification and monitoring through the use of specific risk management tools. An internal economic capital model has been developed and incorporated into the company’s strategic decision-making process. High economic, political and regulatory risk exposures are expected to remain a significant challenge for the company’s risk management”.