AM Best has revised the outlook to positive from stable for the long-term issuer credit rating and affirmed the financial strength rating of A (Excellent) and the long-term ICR of “a” (Excellent) of Bermudian-based Group Ark Insurance Ltd. The outlook of the FSR is stable.

Gail is a wholly-owned subsidiary of Ark Insurance Holdings Ltd, the non-operating holding company of the Ark group.

Concurrently, AM Best has revised the outlook to positive from stable for the long-term issue credit ratings on Gail’s outstanding rated instruments and affirmed the long-term IRs.

The agency said the positive outlook of the long-term ICR reflects AM Best’s expectation that Ark will maintain its profitability at a level commensurate with a strong operating performance assessment, supported by effective cross-cycle underwriting management.

The credit 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 ratings reflect Gail’s strategic importance to Ark, as the group’s Bermudian-based [insurance and reinsurance] vehicle. Gail provides reinsurance to Ark’s corporate member at Lloyd’s and writes third-party [insurance and reinsurance] business.

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.

AM Best said Ark’s risk-adjusted capitalisation is projected to remain at this level, supported by good internal capital generation. The balance sheet strength assessment also 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 use of reinsurance and robust exposure management.

The agency said the adequate operating performance assessment considers the group’s good overall performance, illustrated by a consolidated five-year (2019-2023) return-on-equity and net combined ratio of 22.8 per cent and 89.4 per cent (as calculated by AM Best), respectively.

AM Best said it expects Ark to maintain robust technical return metrics over the underwriting cycle, notwithstanding the potential volatility associated with its catastrophe-exposed property business.

Ark’s recent underwriting performance has proven resilient to major losses. For 2023 and the first nine months of 2024, Ark reported a consolidated net combined ratio of 86 per cent (as calculated by AM Best) and 88.9 per cent (as reported by the company), respectively, driven by selective underwriting across all lines of business and prior-year reserve releases.

Furthermore, earnings have been supported by the group’s solid investment income, which has reflected the improved interest rates environment in recent years.

Ark’s neutral business profile assessment is reflective of its diversified underwriting portfolio across its Lloyd’s and Bermuda [insurance and reinsurance] platforms.

The group reported gross written premium of $1.9 billion in 2023 and $1.9 billion for the first nine months of 2024.

AM Best said Ark benefits from experienced and stable management and underwriting teams that have been strengthened appropriately as its business has grown.