AM Best has affirmed the financial strength rating of A (Excellent) and the long-term issuer credit ratings of “a+” (Excellent) of Delaware’s Nuclear Electric Insurance Ltd and its wholly-owned subsidiaries ― Cedar Hamilton Ltd of Bermuda and Neil Overseas Designated Activity Company of Ireland.

The outlook of these credit ratings is stable.

Cedar Hamilton, a Class 3 insurer licensed and regulated by the Bermuda Monetary Authority, provides specialty lines capacity to Neil’s members, and Neil Overseas underwrites insurance programmes for nuclear power stations within the European Union.

The ratings reflect Neil’s balance sheet strength, which AM Best assesses as strongest, as well as its marginal operating performance, favourable business profile, and appropriate enterprise risk management.

AM Best said: “The ratings also acknowledge Neil’s management culture and its exclusive leadership position in the US nuclear power-generating industry.

“Neil essentially underwrites the entire nuclear utility property insurance coverage in the United States. Neil continues with its mission of maintaining the financial strength to cover two full-limit nuclear losses, while promoting nuclear industry risk management and safety practices.

“Partially offsetting these positive rating factors are Neil’s primary focus on property catastrophe risks and related business interruption claims, with the subsequent financial stress this could cause in the unlikely event of two full-limit losses.

“Despite positive results in most years, the company remains exposed to volatility in underwriting results given the nature of the risks it insures and because of claims activity, given that it relies on one market and two principal product lines.”

The agency added: “However, these factors are inherent to captive mutual insurers focused on a particular niche market supported by its members. Nonetheless, Neil designed its risk management programme to manage risks within the company’s defined tolerance levels.

“Neil also maintains a comprehensive loss prevention programme, with a specialised, effective loss prevention department closely working with insured members to control losses. Neil’s loss prevention effort is supported by a panel of employed and contract nuclear engineers.”

AM Best said the ratings also recognise Neil’s history of maintaining sufficient capital to support its ongoing obligations, which includes its financial flexibility to suspend policyholder distributions.

It added that Neil has the contractual right to assess a retrospective premium for 10 times each member’s annualised premium, which strengthens the company’s financial flexibility.

To ensure that members’ capitalisation is adequate to support such an action, Neil requires members to maintain an investment-grade credit rating or provide collateral. This facility has never been used, the agency said.

Key rating factors that could lead to a downgrade of Neil’s ratings over the longer term, AM Best said, include substantial increases in losses and significant erosion of capital or loss of members.