A.M. Best Affirms Ratings of Island Heritage Insurance Company, Ltd. [Professional Services Close – Up]

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A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and issuer credit rating of "a-" of Island Heritage Insurance Company Ltd. (Island Heritage) (Cayman Islands).

The outlook for both ratings is stable.

The ratings reflect Island Heritage's solid level of risk- adjusted capitalization, favorable operating results, experienced management team and local market expertise.

Solid underwriting results along with investment income have led to organic surplus growth in recent years, as well as a strong five- year average combined ratio. This has enabled Island Heritage to maintain more than adequate risk-adjusted capitalization for its current business profile. The management team at Island Heritage has extensive knowledge of each island and maintains effective risk management strategies. The company focuses on the unique needs of the Caribbean property owner and designs its programs to provide the depth of coverage needed. In addition, catastrophe risk is mitigated by Island Heritage's conservative reinsurance program, which protects its capital from both the frequency and severity of events.

Partially offsetting these favorable rating factors is the geographic concentration of Island Heritage's business in the Caribbean, which exposes it to substantial losses from catastrophic events, the increasingly competitive landscape in its operating territories and local regulatory risk. Island Heritage, like other regional insurers, manages its exposure through the heavy use of reinsurance protection.

While the outlook is stable, factors that could contribute to rating enhancement include continued strong underwriting performance and overall profitability, and an upgrade in Cayman Islands' country risk tier rating.

Factors that may lead to negative rating actions include a sustained decline in Island Heritage's underwriting profitability, significant deterioration in its risk-adjusted capitalization as measured by Best's Capital Adequacy Ratio (BCAR) and a downgrade in Cayman Islands' country risk tier rating.

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 utilized include: "Risk Management and the Rating Process for Insurance Companies"; "A.M. Best's Perspective on Operating Leverage"; "Insurance Holding Company and Debt Ratings"; "Rating Members of Insurance Groups"; "Understanding BCAR for Property/ Casualty Insurers"; "Understanding Universal BCAR"; "Catastrophe Analysis in A.M. Best Ratings"; and "Evaluating Country Risk." Best's Credit Rating Methodology can be found at ambest.com/ratings/ methodology.

A.M. Best Company is an insurance rating and information source.

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