AM Best, the credit rating agency, has upgraded the outlook for Group Ark Insurance Limited (GAIL) (Bermuda) from stable to positive for its Long-Term Issuer Credit Rating (Long-Term ICR), while affirming the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term ICR of “a” (Excellent).
GAIL, a wholly owned subsidiary of Ark Insurance Holdings Limited (Ark), the non-operating parent company of the Ark group, also saw the outlook for its Long-Term Issue Credit Ratings (Long-Term IRs) revised to positive from stable, with the ratings affirmed. A detailed list of Long-Term IR ratings is provided below.
The positive outlook for the Long-Term ICR reflects AM Best’s expectation that Ark will maintain strong profitability through effective underwriting management, ensuring stable performance across market cycles.
The Credit Ratings reflect Ark’s solid balance sheet strength, which AM Best evaluates as very strong, alongside its adequate operating performance, neutral business profile, and sound enterprise risk management (ERM).
The ratings also take into account GAIL’s strategic importance to Ark, as it serves as the group’s Bermuda-based re/insurance arm. GAIL provides reinsurance to Ark’s corporate member at Lloyd’s and also writes third-party re/insurance business.
Ark’s balance sheet strength is supported by its risk-adjusted capitalisation, which is assessed at the strongest level according to Best’s Capital Adequacy Ratio (BCAR).
This capitalisation is expected to remain strong, driven by solid internal capital generation. The balance sheet also benefits from prudent reserving, a low-risk investment portfolio, strong financial flexibility, and a robust liquidity profile.
However, the company does have significant exposure to catastrophe risk, which AM Best expects to manage through reinsurance and effective exposure management strategies.
The group’s adequate operating performance is demonstrated by its strong overall results, including a five-year (2019-2023) average return-on-equity of 22.8% and a net combined ratio of 89.4%, as calculated by AM Best. Despite potential volatility from its catastrophe-exposed property business, AM Best expects Ark to maintain strong technical returns across the underwriting cycle.
Ark’s underwriting performance has proven resilient, as evidenced by its ability to withstand major losses. For 2023 and the first nine months of 2024, the group reported net combined ratios of 86.0% (as calculated by AM Best) and 88.9% (as reported by the company), respectively, bolstered by selective underwriting and prior-year reserve releases. Earnings have also been supported by solid investment returns, benefiting from the improved interest rate environment in recent years.
Ark’s neutral business profile reflects its diversified underwriting activities across its Lloyd’s and Bermuda (re)insurance platforms.
The group reported gross written premiums of USD 1.9 billion in both 2023 and the first nine months of 2024. Ark is further supported by an experienced and stable management team that has grown alongside the business.
