A.M. Best Affirms FSR for Island Heritage Insurance Co.

August 6, 2004

A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) of Island Heritage Insurance Company Ltd (Cayman Islands). The rating outlook is stable.

The rating reflects Island Heritage’s excellent capitalization, continued favorable underwriting and operating results, modest net underwriting leverage and growing market presence in the Caribbean. It also reflects the company’s effective use of reinsurance and conservative investment strategy. These factors have enabled Island Heritage to increase its capital base and enhance its financial strength in the last five years.

Partially offsetting these positive rating factors is the company’s significant catastrophe exposure, high reliance on reinsurance and its increased operating costs. Island Heritage’s continued expansion initiatives into new southern territories, below the hurricane belt, are intended to improve its spread of risk. Such initiatives, however, have contributed to rising operating costs as the company continues to increase its marketing efforts and invest in computer system capabilities.

Island Heritage, a multi-island insurer, has been writing primarily residential property business across the Caribbean since its inception in 1996.

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