AM Best revises Island Heritage rating outlook to positive

Rating agency AM Best Co. affirmed Island Heritage’s financial strength rating of “A-” and issuer rating of “a-”, and increased the outlook for both to positive from stable.  

The rating agency said the ratings reflect the insurer’s solid level of risk-adjusted capitalisation, favourable operating results, experienced management team and local market expertise. In addition, the ratings recognise Island Heritage’s affiliation with its parent, BF&M Limited, a Bermuda-domiciled publicly traded holding company.  

Island Heritage has parental support, and this affords the company access to the group’s resources, including financial and investment management and information technology.  

AM Best noted solid underwriting results along with investment income had resulted in surplus growth for the insurer. At the same time, the five-year average combined ratio, which measures the profitability of an insurer’s underwriting operations, was strong.  

“This has enabled Island Heritage to maintain more than adequate risk-adjusted capitalisation for its current business profile,” the rating agency said.  

Partially offsetting these favourable rating factors is the geographic concentration of Island Heritage’s business in the Caribbean, which exposes it to substantial losses from catastrophic events, the increasingly competitive landscape in its operating territories and local regulatory risk.  

AM Best found that Island Heritage’s management has extensive knowledge of each island and maintains effective risk management strategies noting that Island Heritage, like other regional insurers, manages its exposure through the use of reinsurance protection,.  

In addition, catastrophe risk is mitigated by Island Heritage’s conservative reinsurance programme, which protects its capital from both the frequency and severity of events.  

Island Heritage CFO Jon Coleman said the ratings and positive outlook recognise “the continued and improved strengths of Island Heritage’s capitalisation level and enhanced reinsurance protection against severe and frequent catastrophic events”.  

Factors that could lead to a rating upgrade include continued strong underwriting performance and overall profitability, and an upgrade in the Cayman Islands’ country risk tier rating.  

Factors that may lead to negative rating actions are a sustained decline in underwriting profitability, significant deterioration in risk-adjusted capitalisation as measured by Best’s Capital Adequacy Ratio and a downgrade in the Cayman Islands’ country risk tier rating, the rating 
agency said. 


Mr. Coleman