Ratings Roundup: Aspen Specialty, HSB Group

April 2, 2009

A.M. Best Co. has removed from under review with developing implications and upgraded the financial strength rating (FSR) to ‘A’ (Excellent) from ‘A-‘ (Excellent) and issuer credit rating (ICR) to “a” from “a-” of North Dakota-based Aspen Specialty Insurance Company (ASIC), a wholly owned subsidiary of its ultimate parent, Bermuda-based Aspen Insurance Holdings Limited (AIHL), both with stable outlooks. “These rating actions reflect the implementation of reinsurance support provided by ASIC’s Bermuda-based affiliate, Aspen Insurance Limited (AIL), which includes a substantial quota share of all ASIC’s net business and a guarantee of all third-party reinsurance recoverable,” Best explained. “The quota share reinsurance support for ASIC’s business, effective April 1, 2009, represents substantial, additional explicit support for the company by AIHL. Best noted: “During the second half of 2008, AIHL management reached the decision to revise ASIC’s business plan and re-affirm AIHL’s commitment to writing the surplus lines business that ASIC had voluntarily ceased writing as of January 1, 2008. Substantially all new and renewal excess and surplus lines business that had been written by ASIC in prior years was written, as of that date, by another foreign affiliate, Aspen Insurance UK Limited (AIUK) (United Kingdom). This business will now, again, be written by ASIC. Both of AIHL’s non-U.S. operating companies currently maintain FSRs of ‘A’ (Excellent) and ICRs of “a”. The ratings of ASIC also reflect its strong stand-alone capitalization, driven by its low underwriting leverage and negligible investment leverage. These positive rating factors are partially offset by the weaker than expected results reported by ASIC during its initial period of operation, as evidenced by the company’s inability to produce calendar year results in line with those detailed in the business plan shared with A.M. Best. Furthermore, the current competitive market also presents a significant challenge.”

A.M. Best Co. has commented that the ratings of, The Hartford Steam Boiler Group and its members (together, known as HSB Group) remain under review with positive implications, pending completion of the review of the acquisition of HSB Group, Inc. by Munich Reinsurance Company (See related article). The comment follows the announcement of the regulatory approval and closing of the acquisition of HSB Group, Inc. and its operating subsidiaries by Munich Re. In December Best placed the financial strength rating (FSR) of ‘A’ (Excellent) and issuer credit ratings (ICR) of “a” of HSB Group under review with positive implications, following the announcement that it will be acquired by Munich Re. Best said the positive implications reflect its “view that the acquisition by Munich Re will likely have a favorable outcome relative to HSB Group’s ratings.”

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