Fitch Affirms Attorneys’ Liability Assurance Society Rating

January 18, 2005

Fitch Ratings has affirmed the ‘AA-‘ insurer financial strength (IFS) rating of Attorneys’ Liability Assurance Society (Bermuda) Ltd. (ALAS). The Rating Outlook is Stable.

Fitch’s very strong IFS rating on ALAS reflects the company’s good competitive position and strategy in the lawyers’ professional liability market, exceptionally strong capital position, and comprehensive reinsurance protection. Partially offsetting these positives are the underwriting volatility inherent in the lawyers’ liability insurance line, concentration risk as a monoline professional liability insurer, and the competitive nature of the lawyers’ liability market.

ALAS is an established, stable, long-term player in the lawyers’ liability insurance market, with a specialized expertise that enables it to better meet the needs of its insureds and to differentiate itself from the competition with value-added services, particularly in loss prevention and claims management.

Fitch recognizes the challenges inherent in ALAS’ decision to establish adequate retail insurance rates that have historically been higher than most competitors, given the competitive nature of the commercial insurance market for lawyers’ liability coverage.

However, ALAS has generally been successful at balancing its desire to remain price-competitive and provide exceptional loss prevention and claims services to its members with its need to maintain its financial strength.

Fitch believes ALAS has a very strong surplus position that provides ample cushion against high severity losses and potential reserve development. Members’ net worth was $377 million at Aug. 30, 2004, a 20% increase from Nov. 30, 2003, up almost 45% from fiscal year-end 2002. This significant growth was driven by favorable underwriting and investment results, partially offset by premium credits that have been paid to members that continue their coverage with ALAS.

ALAS’ reinsurance program provides significant protection against large losses. Fitch believes that this is especially important for ALAS given the high policy limits it offers and the underwriting volatility inherent in the lawyers’ liability line. ALAS limits its losses to roughly $16.5 million on any one loss, up from $12.3 million previously, as ALAS has decided to retain more risk in house. Fitch views this increase as reasonable, given the reinsurance pricing environment and increased level of capitalization at the company.

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