A MAJOR Bahamian insurer has seen its balance sheet “bolstered” by its parent as a result of recent hurricane-related losses.
A. M. Best, the insurance rating agency, said Security and General Insurance Company had received a fourth quarter capital injection from its Bermuda-based owner following recent storm payouts. The rating agency, which reaffirmed the Bahamian property and casualty insurer’s creditworthiness, provided few details and its top executive, Marlon Graham, did not return Tribune Business’s voice mail message yesterday seeking comment.
However, A. M. Best described Security and General’s operating performance as “marginal” due to the effects of the 2016 and 2017 hurricane season, resulting in it “underperforming” the rest of the Caribbean general insurance market with “below average earnings”.
“Security and General’s balance sheet was bolstered by a fourth quarter capital contribution from the holding company following losses from hurricanes to strike the Bahamas and Turks and Caicos islands over the past two years,” A. M. Best revealed.
“Operating performance is considered marginal due to losses from hurricanes, which have resulted in Security and General underperforming the property and casualty industry in the Caribbean.
“The business profile is limited due to the company’s concentration of risk in property and motor lines of business in the Bahamas, which has contributed to its below average earnings performance.”
Security and General’s financial performance will have been impacted by Hurricane Matthew in 2016 and, this year, its exposures to Irma and Maria via risks it underwrites in the Turks & Caicos.
Security and General’s parent is Bermuda-based Colonial Group International, an entity owned by Edmund Gibbons Ltd - a vehicle for the wealthy Gibbons family.
There is nothing in A. M. Best’s report to suggest that Security and General is in financial difficulties, and the rating agency reaffirmed the underwriter’s Financial Strength Rating (FSR) of ‘A-’ (Excellent) and long-term Issuer Credit Rating of ‘a-’. The outlook is ‘stable’.
“The ratings of Security and General Insurance Company reflect the company’s balance sheet strength, which A.M. Best categorises as strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management,” A. M. Best added.
It applied the same ratings to Colonial Group International’s two other Bahamian subsidiaries. These are Atlantic Medical, the health insurer, and Colonial Pensions Bahamas.
Colonial Group International has equity in excess of $180 million, and manages over $300 million in premium income and more than $55 million in pension contributions annually.
A. M. Best, meanwhile, has also reaffirmed its ‘A-’ (Excellent) financial strength rating, and ‘a-’ issuer credit rating, for Summit Insurance Company - one of Security and General’s main Bahamian property and casualty rivals.
Summit chiefly underwrites business placed through Insurance Management, and A. M. Best added: “The ratings reflect Summit’s balance sheet strength, which A.M. Best categorises as ‘strongest’, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
“The ratings also consider Summit’s conservative investment policy, high liquidity and effective risk management procedures that include an appropriate reinsurance programme developed to mitigate exposure to natural catastrophes. Summit’s capital position is enhanced by investment income and organic surplus growth achieved from profitable underwriting results.”
On the downside, A. M. Best added: “The business profile is limited mainly due to the company’s geographic concentration within the Bahamas, which exposes them to moderate economic, political and financial system risk. Summit also has significant exposure to natural catastrophes in the Caribbean and high dependence on reinsurance.
“Additionally, the continuing soft market conditions and high competition in the Bahamas remain obstacles for growth. However, the recent hurricane activity, although not affecting the Bahamas directly, has led to a harder reinsurance market in the Caribbean, and rates are expected to trend upwards for the next 12 months.”