AM Best has affirmed the financial strength rating of A (Excellent) and the long-term issuer credit rating of “a” (Excellent) of Bermudian-based Group Ark Insurance Limited.

Gail is a wholly owned subsidiary of Ark Insurance Holdings Limited, the non-operating holding company of the Ark group.

Concurrently, AM Best has affirmed the long-term issue credit ratings on Gail’s outstanding rated instruments.

The outlook of these credit ratings is stable.

The ratings reflect Ark’s consolidated balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

In addition, the ratings reflect Gail’s strategic importance to Ark, as the group’s Bermudian-based re/insurance vehicle. Gail provides reinsurance to Ark’s corporate member at Lloyd’s and since 2021 writes third-party re/insurance business, in line with the group’s scale-up business plan.

Ark is a property/casualty and specialty re/insurance group, operating through an established Lloyd’s platform. Since 2021, Ark has been scaling up its Lloyd’s platform and underwriting third-party insurance and reinsurance business from Bermuda through Gail.

The group’s scale-up is supported by $605 million of capital from White Mountains Insurance Group Ltd, injected on January 1 2021, and the issuance of $164 million of subordinated debt during 2021.

Ark’s balance sheet strength is underpinned by consolidated risk-adjusted capitalisation at the strongest level, as measured by Best’s capital adequacy ratio.

AM Best said Ark’s risk-adjusted capitalisation is projected to remain at this level as the group executes its scale-up business plan, supported by good internal capital generation.

The balance sheet strength assessment considers Ark’s prudent reserving, low risk investment portfolio, good financial flexibility and strong liquidity profile. A partially offsetting factor is the company’s material exposure to catastrophe risk, which AM Best expects to be managed through the appropriate use of reinsurance and robust exposure management.

The adequate operating performance assessment considers the group’s robust underwriting performance track record at Lloyd’s and execution of its scale-up business plan to date. AM Best expects Ark to maintain good technical return metrics over the underwriting cycle, notwithstanding the execution risk associated with its continued scale-up.

In 2021, Ark reported a consolidated combined ratio of 90.9 per cent, as calculated by AM Best. While the company’s profitability remains exposed to potential volatility from future catastrophe events, Ark’s recent underwriting performance has proven resilient to event losses.

In addition, AM Best expects the group’s sound technical earnings to date in 2022 (combined ratio for the first nine months of 90.4 per cent, as reported by Ark) to offset the negative impact of unrealised investment losses on Ark’s operating results for the year.

Ark’s neutral business profile assessment is reflective of its established profile at Lloyd’s, and its current and projected diversified underwriting portfolio. The group’s gross written premium reached $1.1 billion in 2021, compared with $596 million in 2020, indicating positive market acceptance of the scale-up.

In line with its strategic plan, Ark has achieved further growth over 2022, with gross written premium reaching $1.3 billion for the first nine months of the year. Ark benefits from experienced and stable management and underwriting teams, which partially mitigates the execution risk associated with the material scale-up of its operations.