AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of United Kingdom Mutual War Risks Association Limited (UK War Risks or the Association) (United Kingdom). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect UK War Risks’ balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

UK War Risks’ balance sheet strength is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Capital consumption is driven largely by investment risk, with UK War Risks ceding almost all of its underwriting exposure to third-party reinsurers, barring a marginal deductible for certain risks. The balance sheet strength assessment also considers the Association’s small capital base and material dependence on reinsurance. Counterparty credit risk is mitigated partly by the excellent credit quality and good diversification of the Association’s reinsurance panel.

While UK War Risks’ overall earnings in recent years have benefited significantly from elevated premium levels, historical operating performance has been dependent on investments earnings due to the Association’s limited risk retention. Prospective operating performance is expected to remain sensitive to fluctuations in premium volume and volatility in investment results, with the latter being a result of the Association’s exposure to riskier asset classes such as equities and alternative investments.

UK War Risks has an established profile as a specialist underwriter of marine war risk insurance, covering a range of commercial vessels worldwide. However, the Association is of limited size and its niche underwriting portfolio has a concentrated membership base. The loss of a single large member could lead to a sharp decline in underwriting earnings.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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