The financial strength of Hamilton-based Elwood Insurance Limited has been upgraded from B+ to B++ by rating agency AM Best, which has also issued a credit rating of “bbb.”The outlook for both ratings is stable.In a statement AM Best said the ratings recognise Elwood’s “excellent capitalisation level, history of positive operating performance, conservative reserve practices and effective management of exposures.

“Over the past five years, return on surplus has averaged 24.5 percent, while surplus levels have increased at a compound annual growth rate of 29.2 percent through the accumulation of net profits.” Partially offsetting these positive rating factors is AM Best’s concern with the high balance sheet leverage of Elwood’s ultimate parent, Celanese Corporation, which could negatively impact the operations of its captive, it feels. Additional offsetting rating factors are Elwood’s exposure to some low frequency, high severity hazards in its risk profile, coupled with high limits and high net retentions.AM Best notes: “The risk management team of Celanese takes an enterprise-wide approach to managing its risks and utilising the captive as an integral tool in this process.

“Elwood’s management also has demonstrated its ability to avoid the mass market of unrelated business. Instead, Elwood utilises its relationships and those of Celanese to develop a variety of unique and non-correlating accounts, which provide a favourable enhancement to its overall book of business.

“Nonetheless, Elwood’s long-term growth opportunities primarily depend on Celanese’s business success.”