Best Affirms Steamship Mutual Underwriting (U.K.) ‘A-‘ Ratings

March 24, 2006

A.M. Best Co. announced that it has affirmed the financial strength rating of “A-” (Excellent) and assigned an issuer credit rating of “a-” to the U.K.-based Steamship Mutual Underwriting Association Limited (Steamship London or the Club) with a stable outlook.

“The rating reflects the Club’s improving risk-adjusted capitalization and strong performance, as well as strong support provided by Steamship Mutual Underwriting Association (Bermuda) Ltd.” said Best. “An offsetting factor is the modest level of the Club’s capitalization ($10.5 million anticipated at year-end February 2006).”

Best also said it “believes that Steamship London’s risk-adjusted capitalization is likely to improve as absolute capitalization increases through the retention of surplus and underwriting risk stabilizes as the business matures (Steamship London recommenced underwriting in 2003).

“Steamship London benefits from explicit support from Steamship in the form of an annually renewable reinsurance. This covers 95 percent of the first $30 million of Steamship London’s net liabilities for any policy year and 100 percent of liabilities in excess of $30 million. Members of Steamship London are de facto members of Steamship. Additionally, as a member of the International Group of Protection and Indemnity Clubs, Steamship London benefits from the significant reinsurance protection purchased by the International Group.”

The rating agency characterized Steamship London’s performance as “excellent.” It anticipates that the mutual will “report a 45 percent return on accumulated surplus when the year-end February 2006 figures are published (59 percent at year-end February 2005). This excellent performance is largely attributable to an exceptionally low expected loss ratio of less than 10 percent due to the company’s minimal risk retention net of reinsurance.”

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