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 Ltd.

Gail is a wholly owned subsidiary of Ark Insurance Holdings Ltd, 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 agency said, the ratings reflected Gail’s strategic importance to Ark as the group’s Bermudian-based reinsurance vehicle.

Gail provides reinsurance to Ark’s corporate member at Lloyd’s and writes third-party reinsurance business.

Ark is a property/casualty and specialty reinsurance 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 in 2021.

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

Ark’s risk-adjusted capitalisation is projected to remain at this level, 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 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 2022, Ark reported a consolidated combined ratio of 85.8 per cent, as calculated by AM Best.

While the company’s profitability remains exposed to potential volatility from catastrophe events, Ark’s recent underwriting performance has proven resilient to event losses, AM Best said.

In 2023, Ark reported a combined ratio for the first nine months of 86.5 per cent, driven by selective underwriting across all lines of business, strengthening of premium rates and prior-year reserve releases.

Ark’s neutral business profile assessment was reflective of its established profile at Lloyd’s and its current and projected diversified underwriting portfolio, the agency said.

The group’s gross written premium reached $1.5 billion in 2022, compared with $1.1 billion in 2021 and $596 million in 2020, indicating positive market acceptance of the scale-up.

In line with its business plan, Ark has achieved further growth over 2023, with gross written premium reaching $1.7 billion for the first nine months of the year.

AM Best said Ark benefited from experienced and stable management and underwriting teams, which partially mitigated the execution risk associated with the material scale-up of its operations.