The operating units of Bermuda-based Lancashire Holdings have had their financial strength rating of A (excellent) affirmed by AM Best.The rating agency also affirmed the issuer credit ratings of “a” of Lancashire Insurance Company Ltd (Hamilton, Bermuda) and Lancashire Insurance Company (UK) Ltd (UK).Additionally, Best affirmed the issuer credit rating of “bbb” and debt rating of bbb-”on $130.8 million 3.7 percent above LIBOR/Euribor subordinated notes, due in 2035 of Lancashire Holdings. The outlook for all ratings is stable.Best said the ratings apply to Lancashire’s excellent risk-adjusted capitalisation, very strong operating results since inception, experienced management team and the financial flexibility afforded to the group by the listing of Lancashire Holdings’ shares on the London Stock Exchange.Additionally, the ratings reflect Lancashire’s strong enterprise risk management framework, which has mandated its conservative operating strategies. This customised risk management framework has produced excellent underwriting results, which has enabled the company to consistently generate return measures at the high end of its peer group. Lancashire’s success is attributable to adhering to and executing on its initial business plan.Partially offsetting these positive attributes is Lancashire’s exposure to low frequency, high severity events due to the targeted lines of its business.Lancashire’s operating activities focus on a specialist approach writing core accounts but also targeting dislocated classes of business. The business plan encompasses a diversified mix of business, both geographically and by class, including direct short-tail property insurance and reinsurance, including energy and terrorism, as well as a small portfolio of third-party AV52 aviation liability and marine risks, which includes hull and protection and indemnity coverage.Best added that rating factors that could lead to Lancashire’s ratings being upgraded would be the continuation of a long-term, consistently strong operating profitability and maintaining excellent risk-adjusted capital levels, which would be commensurate with its ratings.The rating factors that could lead to a negative outlook and/or a downgrading of the ratings includes unfavourable operating profitability trends, outsized insurance or investment losses and a significant decline in the company’s risk-adjusted capital that would not be supportive of the current rating level.