AM Best Affirms Credit Ratings of BF&M Limited and Its Subsidiaries

AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a” (Excellent) of BF&M Life Insurance Company Limited, BF&M General Insurance Company Limited and Island Heritage Insurance Company, Ltd. (Island Heritage) (Cayman Islands). AM Best also has affirmed the Long-Term ICR of “bbb” (Good) of the parent company, BF&M Limited (BF&M). All companies are domiciled in Hamilton, Bermuda, unless otherwise stated. The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect BF&M’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

BF&M’s ratings and outlooks are supported by its strongest balance sheet strength assessment, driven by its strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). Over the past five years, BF&M has maintained a consistent level of GAAP capital. Given low premium growth this absolute level of capitalization remains more than sufficient to support its underwriting and investment risks. BF&M mitigates volatility in capitalization levels with significant catastrophe reinsurance protection. This protection continues to be prioritized despite a hardening reinsurance market, though BF&M has retained slightly more risk in 2023 to mitigate price increases and secure sufficient limits. BF&M’s available capital gives it the flexibility to make these minor adjustments to the structure of its reinsurance program without exposing its balance sheet to unacceptable levels of volatility.

BF&M has a history of profitable operating results, though unfavorable net results in 2022 and consistent dividends have limited equity growth. In years when underwriting results were down, investment income was typically able to provide an offset. However, results in 2022 were adversely affected by pressure on core underwriting, and more materially, unrealized losses on its investment portfolio. Pressure on underwriting income was due to a combination of factors, including loss-cost pressure on property and motor claims, some adverse severity in property claims, higher reinsurance costs and increased utilization of health benefits. The company is mitigating these pressures with selective rate increases on some products, but pressure on health and property/casualty (P/C) lines of business is expected to continue over the near term. The company also has a significant pension management business that provided additional fee income in the period, though a decline in asset valuation in 2022 negatively impacted results in this line.

The company’s business profile is reflective of the solid market share it garners in its domestic market of Bermuda and geographic diversification of business throughout the Caribbean through its Island Heritage subsidiary, where it adds P/C premium. Limited reinsurance capacity is likely to impact growth potential in P/C products. Premium growth in the near term likely will be reflective of rate increases as reinsurance capacity constraints will hinder the ability to write new business. However, this capacity constraint is region-wide and BF&M is relatively well-positioned to pass on additional reinsurance costs to customers and restructure reinsurance coverage to provide more opportunities to grow its policy count. Premium growth in BF&M’s health line of business has been stagnant since the local government moved to fund its largest health provider and its authority, the Bermuda Hospital Board, with a block grant annually in 2019. This was considered phase one in what was expected to be a lengthy process toward a national plan, which then was delayed due to COVID-19. The health strategy of the Bermudian government now is less certain as its Bermuda Health Strategy 2022-2027 document contains the overall policy goals of the government but fewer details on implementation. AM Best will continue to monitor the developments of the Ministry of Health’s future market reform plans and how BF&M adapts to them.

BF&M’s significant catastrophe reinsurance protection and overall risk management philosophy are central to the organization’s efforts to retain appropriate amounts of risk and mitigate adverse financial impacts to the group. Minimal catastrophe activity in BF&M’s jurisdictions drove little impact to the P/C operations from catastrophe losses in recent years. Risk appetite continues to be conservative, and responsible underwriting is put before premium growth. When combined with the extensive reinsurance program, the company has managed to navigate multiple adverse market events such as hurricanes and the COVID-19 pandemic. AM Best will continue to monitor the appropriateness of the reinsurance program and the effects of changing reinsurance market conditions on BF&M’s operating performance.

In addition, AM Best does not consider the investment by BF&M into a fund holding a 16.3% share in Argus Group Holdings Limited (Argus) to be of sufficient materiality to warrant rating action. However, the recent announcement by BF&M regarding its strategic partnership with Equilibria Capital Management to engage in a merger defense strategy, in addition to the board’s adoption of a shareholder rights plan in response to Argus’s pending acquisition of a large minority stake in BF&M, continues to imply less-than-full alignment between the board and other key stakeholders. AM Best will continue to monitor the status of this transaction and may take rating action if the exercise of BF&M’s exclusive option to purchase an additional 13.7% of Argus is determined to be material to its business strategy, corporate governance or balance sheet strength.

AM Best also continues to monitor the status of the pending purchase of a minority stake in BF&M by a subsidiary of Argus Group Holdings Limited, announced in early June 2023. AM Best expects BF&M to continue in its normal course of business operations while the transaction remains pending. AM Best will review any potential impact on strategy and operations should this transaction ultimately close.

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 specializing 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

Copyright © 2023 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.


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