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 that is at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Offsetting balance sheet strength factors include the Association’s small capital base and its dependence on reinsurance. UK War Risks cedes almost all of its underwriting risk to third-party reinsurers, retaining only a small deductible for certain risks. Counterparty credit risk is mitigated partially by the diversity and excellent credit quality of the Association’s reinsurers.

Although profitable over the longer term, UK War Risks’ operating performance has been subject to volatility. Historically, operating results have been dependent on investment earnings, which have been volatile due to the Association’s significant exposure to equity markets. An excellent result of approximately USD 4.5 million is expected for the year-ending February 2021, due to the sustained increase in premiums and a robust investment performance during the year.

UK War Risks has an established profile as a specialist underwriter of war risk insurance for marine vessels. However, the Association’s business profile is limited due to its small size, niche underwriting portfolio and concentrated membership base. The loss of a single large member would lead to a sharp decline in technical 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 media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

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