Yesterday, a press release was issued detailing that Insurance credit rating agency A.M. Best has upgraded the financial strength rating of CBL Insurance Ltd (CBL) to B++ (Good) from B+ (Good) and the issuer credit rating to "bbb" from "bbb-". The outlook for the ratings has been revised to stable from positive
The rating actions mainly recognise CBL's continued strong earnings trend driven by profitable underwriting, which has enabled it to consistently grow its capital base and regulatory solvency position. Additionally, the rating upgrade acknowledges CBL's demonstrated capability of underwriting niche insurance lines that are expected to achieve favourable loss and combined ratios.
Over the past three years, the combined ratio of CBL remained very strong and consistent at around 85%; though net premium revenue, on average, compounded at an annual rate of 50%. The favourable underwriting experience largely reflects the company's growing access to a desirable book of European business.
A.M. Best state that these positive rating factors are mainly offset by CBL's high underwriting leverage. Underwriting leverage had been heightened, more so earlier in the recent five-year period, by very significant growth rates in premium revenue, which had outpaced the growth rate in capital.