Ratings Roundup: Bison, Queen’s Island

November 24, 2009

A.M. Best Co. has affirmed the financial strength rating of ‘A-‘ (Excellent) and issuer credit rating of “a-” of Bermuda-based Bison Insurance Company Limited, both with stable outlooks. “The ratings,” said Best, “reflect Bison’s historically adequate capitalization, generally favorable operating performance, conservative reserve levels and effective management of its catastrophe exposures. The ratings also recognize Bison’s history of maintaining sufficient capital and financial resources to support its ongoing obligations.” However, the company’s “volatile underwriting results due to the historically low loss frequency, relatively high loss severity nature of its risk profile, coupled with its high limits and high net retentions relative to surplus,” somewhat offset the positive factors. “Also, the continually changing risk profile of Bison’s primary insured causes large profile changes that affect the captive. This is mitigated by Bison’s conservative reserving philosophy and the ongoing, demonstrated support from its parent, Duke Energy Corporation,” Best continued. The risk management team of Duke Energy “takes a holistic approach to managing its risks and utilizing the captive as an integral tool in this process. Bison continues to acquire additional lines of business from Duke Energy, thereby providing additional diversification of risks insured.” Bison’s long-term growth opportunities primarily depend on the business success of the parent company. Long term, the captive will pursue additional lines of business, both from the parent organization and its affiliates. It is useful to note that in 2007, the risk profile of Bison became more conservative, though somewhat narrower, due to the spinoff of Spectra Energy, according to management. “Spectra encompassed all of Duke Energy’s natural gas and pipeline business, which produced the majority of large property and business interruption losses in the past,” best explained. “Bison’s exposure to Gulf of Mexico property losses is significantly diminished, and Bison no longer provides business interruption coverage, subsequent to the spin off, except for limited amounts of coverage in South America in order to comply with contractual obligations.”

A.M. Best Co. has assigned a financial strength rating of ‘A+’ (Superior) and issuer credit rating of “aa-” to Bermuda-based Queen’s Island Insurance Company, Ltd. with stable outlooks. Best explained that the ratings largely reflect the “explicit support provided to Queen’s Island by an affiliate, Berkley Insurance Company (Wilmington, DE), in the form of an aggregate stop loss reinsurance contract, which limits any single calendar year operating loss, and a net worth maintenance agreement with its parent, W.R. Berkley Corporation (WRB).” Queen’s Island is registered as a Class 3A insurer by the Bermuda Monetary Authority in accordance with the Bermuda Insurance Act of 1978. The company writes excess transportation liability coverage for a selection of WRB clients and punitive damages wrap policies for directors’ and officers’ liability insurance.”

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