S&P Affirms Steamship Owners’ P&I (Bermuda) ‘A’ Ratings

Standard & Poor’s Ratings Services announced that it has affirmed its “A” long-term counterparty credit and insurer financial strength ratings on The Standard Steamship Owners’ P&I Association (Bermuda) Ltd. (SB or the club), and, “through guarantees and reinsurance arrangements, the application of the ‘A’ ratings on the parent to The Standard Steamship Owners’ P&I Association (Europe) Ltd. and The Standard Steamship Owners’ P&I Association (Asia) Ltd.” The rating outlook is stable.

“The ratings are based on SB’s very strong financial flexibility (being the balance between capital requirements and sources), strong capitalization and reserves, and strong competitive position,” said S&P. It cited “SB’s dependence on investment income to generate operating profits, higher-than-average investment leverage, and the high level of industry risk associated with protection and indemnity insurance relative to other insurance classes,” as offsetting factors.

S&P said the stable outlook reflects its “expectation that SB’s competitive position will remain strong. However, it is expected that the club will lose a proportion of tonnage at the February 2006 renewal as it imposes significant premium rises on those members currently not deemed to be paying the correct level of premium.

“The combined ratio for the year to Feb. 20, 2006, is due to remain on a par with that recorded in the year to Feb. 20, 2005. The underwriting deficit is expected to materially reduce over the medium term, but is somewhat dependent upon the club achieving significant rate increases from its poorer performing members. A break-even underwriting position is not forecast for at least three years. Free reserves are expected to be maintained at least at their current level. The capital adequacy ratio will be at least in line with the rating level.”

“The stable outlook is reliant upon the club achieving significant increases in premium rates at the February 2006 renewal and/or there being no deterioration in the underwriting experience beyond that forecast,” indicated S&P credit analyst Lucy Stupples.