AM Best Assigns Credit Ratings to National Grid Insurance USA Ltd

AM Best has assigned a Financial Strength Rating of A- (Excellent) and a Long-Term Issuer Credit Rating of “a-” (Excellent) to National Grid Insurance USA Ltd (NGIUSA) (United States). The outlook assigned to these Credit Ratings (ratings) is stable. NGIUSA is a captive of National Grid plc (NG), a large utility group.

The ratings reflect NGIUSA’s balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management. The ratings also consider rating enhancement from NGIUSA’s affiliate, National Grid Insurance Company (Isle of Man) Limited (NGICL), which is the largest captive of the NG group and provides reinsurance support to NGIUSA.

NGIUSA’s balance sheet strength is underpinned by risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), at the strongest level. However, AM Best notes that risk-adjusted capitalisation is materially lower on a catastrophe stressed basis due to the large net line sizes offered by NGIUSA relative to its capital, which exposes its risk-adjusted capitalisation to potential volatility. The assessment also factors in the company’s high reinsurance dependence, which is partially mitigated by the strong credit quality of the reinsurance panel.

NGIUSA has a strong operating performance track record, as demonstrated by a five-year (2019-2023) weighted average return on equity ratio of 8.4%. Overall earnings have been driven by excellent underwriting performance, evidenced by a five-year (2019-2023) weighted average combined ratio of 21.3%. AM Best expects NGIUSA to accumulate underwriting profits over the longer term, albeit subject to potential volatility given the large net policy limits offered relative to its premium base.

AM Best assesses NGIUSA’s business profile as limited, reflecting its small and geographically concentrated portfolio of high-value property/casualty cover for NG’s United States based assets. NGIUSA is strategically important to NG as it maintains a key role in supporting the group’s risk management strategy, primarily providing a broad range of property damage and business interruption, casualty, and cyber cover to meet the majority of the group’s insurance needs in the United States.

AM Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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