A.M. Best Europe – Rating Services Limited has affirmed the
financial strength rating of A- (Excellent) and issuer credit rating of
“a-” of Electrical Contractors’Insurance Company Limited(ECIC)
(United Kingdom).The outlook for both ratings remains stable.
ECIC’s risk-adjusted capitalisation is likely to remain excellent in
2012 and into 2013, in spite of a payment to be made in the second half
of 2012 of an exceptional dividend of GBP 6 million. This payment is to
help ECIC’s parent, the trade organisation The Electrical
Contractors’ Association, meet cash calls in relation to a
loss-making Lloyd’s syndicate, the interest in which has now been
sold. Risk-adjusted capitalisation is otherwise supported by retained
earnings and a move to a more conservative investment portfolio.
An offsetting rating factor is ECIC’s high reliance on third-party
reinsurance, particularly quota share agreements, with the company
having ceded approximately 40% of gross premiums written in 2011 (2010:
50%). However, this proportion is expected to reduce further in 2012,
with subsequent reductions likely to take it to nearly 25% in 2014,
thereby diminishing ECIC’s exposure to increased reinsurance rates and
Despite challenging market conditions in the United Kingdom, a good
underwriting performance is anticipated for ECIC in 2012, with a
combined ratio between 40% and 45%. ECIC has a strong underwriting
record, which is underpinned by an excellent knowledge of its core
market. In 2011, the company produced an exceptional combined ratio of
15%, due to a negative loss ratio since the decrease in net claims
reserves was marginally greater than the amount of net claims paid.
ECIC’s investment performance is less volatile than in the past after
reallocations of a proportion of investments from equities to high
quality fixed income securities during 2010 and 2011 and improved
oversight of investment managers’ performance.
ECIC has a good niche business profile providing insurance to electrical
and mechanical building services contractors and other specialist
construction professionals in the United Kingdom. The company benefits
from its relationship with its parent, which provides access to a large
membership base. Distribution is primarily via a network of brokers
across the United Kingdom and has been enhanced by an electronic trading
Positive rating actions are unlikely in the near future for ECIC,
whereas unexpected weak operating performance or a deterioration in its
risk-adjusted capitalisation could lead to negative pressure.
The methodology used in determining these ratings is Best’s Credit
Rating Methodology, which provides a
comprehensive explanation of A.M. Best’s rating process and contains the
different rating criteria employed in the rating process. Key criteria
utilised include: “Risk Management and the Rating Process for Insurance
Companies”; “Understanding Universal BCAR”; “Understanding BCAR for
Property/Casualty Insurers”; and “Rating Members of Insurance Groups”.
Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
In accordance with Regulation (EC) No. 1060/2009, the following is a
link to required disclosures: A.M.
Best Europe - Rating Services Limited Supplementary Disclosure.
A.M. Best Europe – Rating Services Limited is a subsidiary of A.M.
Best Company.Founded in 1899, A.M. Best Company is the world's
oldest and most authoritative insurance rating and information source.
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