A.M. Best Revises Issuer Credit Rating Outlook to Positive for Electric Insurance Company and Its Subsidiary [Manufacturing Close – Up]

A.M. Best Co. has revised the outlook to positive from stable and affirmed the issuer credit ratings (ICR) of "a" of Electric Insurance Company (Electric) (Beverly, MA) and its wholly owned subsidiary, Electric Insurance Ireland, Ltd (EIIL) (Dublin, Ireland).

A.M. Best also has affirmed the financial strength rating (FSR) of A (Excellent) of Electric and EIIL. The outlook for the FSR is stable.

The revised outlook for Electric's ICR is due to its improving risk-adjusted capitalization and continued operating profitability. The ratings take into consideration Electric's sound geographic and product line diversification, the reduced risk associated with retrospectively rated commercial policies, value-added commercial insurance services provided to General Electric Company (GE), as well as Electric's strategic importance to GE.

The ratings for Electric are afforded to EIIL primarily due to its affiliation with Electric, its integration into Electric's business plan, as well as its supportive capitalization, profitable operating performance and strategic role in providing commercial lines products to GE in the European Union.

Partially offsetting these positive rating factors are the limitations of Electric and EIIL's commercial lines business to one policyholder (GE), a downturn in underwriting performance of the homeowners' line in recent years (due primarily to severe weather and fire losses) and significant exposure to catastrophic loss from a potential terrorist attack, mainly within the workers' compensation line of business should the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) not be extended beyond 2014. These concerns are partially mitigated by actions presently being taken by Electric to improve personal lines underwriting as well as its efforts to devise a comprehensive plan to mitigate its exposure to the potential loss of TRIPRA protection. However, although surplus and risk-adjusted capitalization could be materially depleted from a terrorist attack without TRIPRA protection, A.M. Best believes that capitalization would continue to support Electric's ratings based on its modeling and current reinsurance program.

Positive rating triggers that could lead to an upgrading of Electric and EIIL's ICRs include continued profitability and capital appreciation, as well as development of a comprehensive terrorism risk mitigation plan in the event that TRIPRA expires at the end of 2014, or if TRIPRA is renewed beyond 2014 for an extended period of time. The ratings and outlook could come under pressure if there were a material weakening in the companies' capitalization, their net exposure to loss from a terrorist attack were to significantly increase or there were a reduction in the business profile or their strategic importance to GE.

More information:

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