Best Affirms Omega Specialty, Lloyd’s Syndicate 958 Ratings

July 15, 2009

A.M. Best Co. has affirmed the financial strength rating of ‘A-‘ (Excellent) and issuer credit rating of “a-” of Bermuda-based Omega Specialty Insurance Company Limited (OSIL), both with stable outlooks.

In a separate action Best also affirmed its Syndicate Rating of ‘A’ (Excellent) and issuer credit rating (ICR) of “a+” of Lloyd’s Syndicate 958, which is managed by Omega Underwriting Agents Limited (OUAL). In addition Best affirmed the ICR of “bbb” of Omega Insurance Holdings Limited (Omega), the parent company of Omega Dedicated Limited (ODL). The outlook on these ratings is also stable.

Best said that in its opinion, “OSIL’s risk-adjusted capitalization is likely to remain excellent in 2009 and 2010, after allowing for the transfer of $129 million from its parent company, Omega Insurance Holdings Limited, following a successful capital-raising exercise at the end of 2008.” Best said the transfer demonstrated that “OSIL benefits from the financial flexibility of Omega. OSIL’s risk-adjusted capitalization is further enhanced by a comprehensive reinsurance program that limits its exposure to major losses.”

Best added that it “anticipates good underwriting performance in 2009, supported by the underwriting discipline and solid risk control infrastructure in place throughout the Omega group.” OSIL derives approximately 60 percent of its gross premiums from Lloyd’s Syndicate 958, and its results are therefore “likely to benefit from the profitability of the syndicate, which has a good earnings record. Investment income is likely to fall, owing to lower U.S. and European interest rates.” Further ahead, Best said it “believes OSIL’s conformity with the group’s conservative reserving and reinsurance strategy will support solid operating performance.”

Turning to Syndicate 958, Best said its ratings “reflect the financial strength of the Lloyd’s market, which underpins the security of all Lloyd’s syndicates.” Best also noted that that the syndicate “benefits from financial flexibility provided by Omega, which is expected to maintain strong consolidated risk-adjusted capitalization in 2009. ODL provides 16.4 percent of the capacity of syndicate 958 for its 2009 year of account. This percentage is expected to increase to approximately 35 percent for its 2010 year of account following an offer to purchase capacity from third party members of the syndicate. In addition OSIL underwrites a 20 percent quota share of the syndicate for its 2009 year of account.”

Best added that it “believes that OSIL will continue to benefit from the strong market profile of Omega and Lloyd’s Syndicate 958. A large proportion of the company’s business in 2009 is likely to be associated with syndicate 958’s underwriting, through the reinsurance of Omega Dedicated Limited (Omega’s corporate member at Lloyd’s) and a 20 percent whole account quota share reinsurance arrangement with the syndicate.

“The percentage of U.S. premium within the portfolio is likely to rise in 2009 due to an increase in business written both directly by OSIL and by Omega US Insurance Inc. (Omega US), for which OSIL underwrites a 50 percent whole account quota share. Omega US is a wholly owned surplus lines subsidiary of Omega, which writes business with a risk profile similar to the U.S. property insurance element of syndicate 958’s account, excluding its marine business.”

Best also noted: “Syndicate 958 has a good business profile within the London market as a specialist underwriter of short-tail, small to medium sized property risks, predominantly located in the U.S. (approximately 48 percent of gross written premium in 2008 derived from U.S. business).” Best also said it believes the syndicate benefits from its presence in the European market through Omega Europe GmbH, a wholly owned subsidiary of Omega that operates solely as a coverholder to the syndicate.”

Source: A.M. Best –

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