OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and issuer credit rating of “a-” RoyalStar Assurance Limited (RSA) (Nassau, Bahamas). The outlook for both ratings is stable.
The ratings reflect RSA’s consistent overall profitability, excellent capitalization and established presence within the Caribbean market. RSA continues to produce positive operating results, which are a function of the company’s prudent underwriting philosophy and steady stream of investment income. Since RSA writes all of its business in the Caribbean, it is exposed to frequent and severe weather-related events. Although this makes RSA somewhat dependent on reinsurance as part of its overall risk management program, the company’s solid reinsurance program reduces its net probable maximum loss to a manageable level.
These positive rating factors are partially offset by RSA’s geographic concentration, dependency on reinsurance, continued exposure to weather-related catastrophe events and sluggish economic conditions in the Bahamas. Furthermore, the Bahamas and other Caribbean insurance markets have become increasingly competitive as indigenous and outside insurers seek to gain market share in the region.
Key rating drivers that may lead to positive rating actions on RSA include continued strong underwriting results in conjunction with surplus appreciation and improvements in the Bahamas’ macroeconomic environment. Negative rating triggers could include prolonged adverse operating results that are exacerbated by a series of large catastrophic events.
The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding Universal BCAR”; “Natural Catastrophe Stress Test Methodology”; and “Assessing Country Risk.” Methodologies can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
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