AM Best affirms Ansvar’s ratings as key excess-of-loss and stop-loss programmes renewed

AM Best affirmed A- IFS rating noting continued reinsurance support from owner EIO following years of PSA claims.

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Am best affirms ansvars ratings as key excess of loss and stop loss programmes renewed
Am best affirms ansvars ratings as key excess of loss and stop loss programmes renewed
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Am best affirms ansvars ratings as key excess of loss and stop loss programmes renewed

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AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) for Ansvar Insurance Limited (Ansvar), based in Australia. The outlook for these ratings is stable.

Ansvar operates as a niche insurer, offering commercial property and casualty products to specific customer groups in Australia, such as care, community, faith, education, heritage, and property owners. The company benefits from a long-established presence in these sectors, leveraging its expertise and brand recognition. However, its reliance on non-affiliated intermediary channels limits its control over distribution, AM Best said.

The ratings reflect the ownership, integration, and support from Ecclesiastical Insurance Office plc (EIO). EIO is a UK-based insurance group specialising in commercial insurance for the faith, heritage, charity, education, and real estate sectors.

EIO is in itself part of the Benefact Group plc, a specialty insurance, investment, and advisory group. The rating enhancement for Ansvar is due to explicit support from EIO, including capital injections and significant intra-group reinsurance protection.

Ratings drivers

AM Best has assessed Ansvar’s operating performance as marginal, noting heightened volatility over the past five years due to weather-related events and physical and sexual abuse (PSA) claims.

The company recorded positive operating earnings in 2022 and 2023, aided by recoveries from a stop-loss reinsurance programme with EIO. Investment income remains a key contributor to overall earnings, with a net investment yield of 5.1% reported in 2023.

Ansvar has experienced a higher-than-expected volume of PSA claims over the past six years, mainly from legacy exposures. While there is high uncertainty in provisioning for these claims, Ansvar’s net exposure is limited by a PSA excess-of-loss cover provided by EIO.

Both the PSA excess-of-loss cover and stop-loss programme have been renewed for 2024, which are expected to limit downside risks to Ansvar’s operating performance and balance sheet strength in the near term. AM Best expects group support to continue if performance volatility persists.

Ansvar’s balance sheet strength is supported by its risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), which is expected to remain at least at the very strong level over the medium term. The company maintains prudent capital management and has a track record of financial flexibility to support its regulatory solvency position and risk-adjusted capitalisation.

Other balance sheet considerations include a low-risk investment portfolio and high reinsurance dependence to support the underwriting of large limit property risks and long-tail liability exposures.

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