BF&M’s financial strength rating of A has been affirmed by AM Best.

The A (excellent) rating applies to all of the insurer’s subsidiaries, BF&M Life Insurance Company Ltd, BF&M General Insurance Company Ltd and Island Heritage Insurance Company Ltd, which operates in the Cayman Islands.

Long-term issuer credit ratings were also affirmed at “a” for the operating companies and “bbb” for the parent company, BF&M Ltd.

The outlook of all these credit ratings is stable.

John Wight, group chairman and chief executive officer of BF&M Ltd, said: “BF&M’s financial strength ratings are market-leading in Bermuda and across the Caribbean. This endorsement by AM Best and our consistent track record over time will serve to further strengthen our position as an insurer of choice.”

AM Best said the ratings reflect the companies’ balance sheet strength, which the rating agency categorises as “strongest”, as well as adequate operating performance, neutral business profile and appropriate enterprise risk management.

In its commentary AM Best highlighted the insurer’s health insurance business in Bermuda and the impact of the Covid-19 pandemic.

“The health business has been somewhat strained by regulatory changes in the Bermuda market,” AM Best said.

“The government made changes to how services delivered at the Bermuda Hospitals Board are funded in 2019 in the first phase of proposed health reform.

“However, with the Covid-19 pandemic, regulators have tabled any movement forward into the next phase. AM Best will continue to monitor any developments regarding this issue.”

On the impact of the pandemic, AM Best said: “Revenues and earnings also have been impacted by the pandemic; however, the shelter-in-place directives by local authorities resulted in favourable utilisation trends.

“AM Best expects near-term earnings to decline as a result of declining premiums from its healthcare line of business, higher operating expenses and lower investment returns due to market volatility.”

BF&M buys significant catastrophe reinsurance to cover itself from natural disaster losses. This, and the insurer’s overall risk management philosophy, were central to its efforts to mitigate negative financial impacts to the group, the commentary added.

“In 2019, Hurricane Dorian tested the effectiveness of the group’s reinsurance protection, which functioned as expected,” AM Best stated.

“Despite the devastation and magnitude of losses, it was mainly an earnings event for the group. However, unpaid claims and associated reinsurance recoverables remain somewhat elevated at this time.”

AM Best described BF&M’s market share in Bermuda as “solid” in all of its lines of business.

“There is also off-island business written by Island Heritage that adds geographic and premium diversification as a large portion of this business is property/casualty products, offsetting BF&M’s health premiums in Bermuda,” AM Best added.