AM Best has affirmed the credit ratings of Bermuda-based insurer BF&M Ltd and its subsidiaries.

The agency affirmed the financial strength rating of A (Excellent) and the long-term issuer credit ratings of “a” (Excellent) of BF&M Life Insurance Company Ltd, BF&M General Insurance Company Ltd and Island Heritage Insurance Company Ltd (Cayman Islands).

AM Best also affirmed the long-term ICR of bbb (Good) of the parent company, BF&M Limited.

The outlook of these credit ratings is stable.

The agency said that the ratings reflect BF&M’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

It added that BF&M’s ratings and outlook are underpinned by the strongest assessment, as measured by Best’s Capital Adequacy Ratio.

AM Best said: “BF&M has a history of maintaining levels of capitalisation more than sufficient to cover the underwriting and investment risks.

“BF&M’s financial results in 2020 were strong and primarily driven by the lower utilisation rates driven by shelter-in-place measures directed by the Bermuda Government in the first half of the year, as the Covid-19 pandemic rapidly affected the island.

“The company’s business profile is reflective of the solid market share it garners in its domestic market of Bermuda and geographic diversification of business throughout the Caribbean through its Island Heritage subsidiary, where it adds primarily property/casualty (p/c) premium.

“BF&M is focused on profitable growth, and in 2020 divested its majority ownership of Insurance Corporation of Barbados Ltd as ICBL’s financial results were not meeting BF&M’s expectations.”

AM Best added: “Premium growth from BF&M’s health line of business has been stagnant since the local government moved to fund its largest health provider and its authority, the Bermuda Hospitals Board, with a block grant annually in 2019.

“This was considered Phase One in what was expected to be a lengthy process towards a national plan, which has been delayed due to Covid-19 and general uncertainty of the longevity of the pandemic. AM Best will continue to monitor the developments of the Ministry of Health’s future market reform plans and how BF&M adapts to them.

“BF&M’s significant catastrophe reinsurance protection and overall risk-management philosophy are central to the organisation’s efforts to mitigate negative financial impacts to the group. However, in 2020, there was minimal impact to the p/c operations from catastrophe loss.

“The main headwind for Caribbean insurers was the Covid-19 pandemic and the resulting containment measures, social distancing requirements, border closures and declines in external demand that led to one of the worst economic contractions in the region’s history.

“Despite this, p/c results remained resilient because of the group’s strict underwriting guidelines and its ability to transition easily to a remote environment.”