The ratings reflect FM Global’s balance sheet strength, which AM Best categorizes as strongest, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management.
FM Global’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), is considered to be strongest and has been time-tested. The group is a leading global property insurer with a balance sheet that has demonstrated an ability to withstand catastrophes year-over-year as recently evidenced in 2017 and 2018. Substantial reinsurance capacity plays an integral role in its ability to preserve capital.
Although underwriting results recently reflected higher volatility, strong investment gains garnered from FM Global’s sizeable investment portfolio have lessened the impact from those heavy catastrophe loss years. Five and 10-year average combined ratios have regressed significantly toward those of the commercial property composite averages, due to the significant catastrophe losses highlighted above. Its strong results over the long term are net of significant membership premium credits afforded to policyholders based on loss experience and implementation of FM Global’s loss control and minimization recommendations.
Buoyed by its strongest risk-based capitalization, management has a history of protecting its policyholders by conservatively reserving losses in a timely fashion. This recognition has reflected worst-case underwriting results typically, especially in CAT scenarios. Superior knowledge of its risks and expedient settlement of claims have uncovered the true underwriting results quickly. These attributes have enabled the company to move on quickly from significant CAT events with results, especially in 2017 and 2018, that have developed favorably in each case with actual losses approximating half of modeled losses in most cases.
As a mono-line commercial property insurer, the group has a singular focus on its specialty expertise. This specialty focus combined with its status as a mutual legal entity enable management to take a longer-term view of running its business and to manage the inherent volatility in its short-tail large commercial property risks.
The stable outlooks reflect AM Best’s view that the group’s risk-adjusted capitalization will remain more than supportive of the current ratings, driven by strong earnings and its leadership position in providing property coverages worldwide. Positive rating action could result if the group’s operating profitability demonstrates lesser volatility over an extended period of time, reflecting superior risk management. Negative rating action could result if operating performance or risk-adjusted capitalization fall markedly short of AM Best’s expectation.
The FSR of A+ (Superior) and the Long-Term ICRs of ‘‘aa” have been affirmed with stable outlooks for
Appalachian Insurance Company
Affiliated FM Insurance Company
FM Insurance Company Limited
FM Insurance Europe S.A.
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Source: AM Best