OLDWICK, NJ–(BUSINESS WIRE)–am the best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICRs) of “aa” (Superior) of Factory Mutual Insurance Company (Johnston, RI) and its subsidiaries, the are collectively referred to as FM Global Group (FM Global). The outlook of these credit ratings (ratings) is Stable. (See below for a detailed list of companies.)
The ratings reflect FM Global’s balance sheet strength, which AM Best rates as the strongest, strong operational performance, favorable business profile and adequate enterprise risk management (ERM).
FM Global maintains the strongest risk-adjusted capitalization as measured by Best’s capital adequacy ratio (BCAR). The group’s balance sheet has demonstrated long-term resilience to losses from natural catastrophes such as those experienced in 2017 and 2018. Increasing significant retentions for their highly protected risk book, a significant excess of loss reinsurance capacity plays an essential role in their ability to grow and sustain capital. Management has historically protected the balance sheet by pre-booking losses in a timely and prudent manner. Ultimate losses routinely outperform modeled losses and management’s prudent and conservative initial reserve estimates, particularly in catastrophe scenarios. Superior knowledge of its risks and speedy claims settlement enable the Group to move on relatively quickly after significant events.
The group has reported underwriting gains for the last three years and the first nine months of 2022 after suffering two consecutive years of underwriting losses in 2017 and 2018 due to significant catastrophe activity. FM Global has delivered strong investment returns from its extensive investment portfolio, which includes a large allocation to equities, which further improves net results and drives solid excess growth. However, the recent volatility in investment markets in 2022 resulted in a significantly negative change in unrealized gains and losses. Its strong cash position mitigates these likely temporary losses. With the recovery of FM Global’s profitability and corresponding excess growth, policyholder loans have been authorized to be paid out as excess capital distributions to policyholders in 2022, after being curtailed in the previous three years.
FM Global has a unique market position with significant exposure to policyholders with well-recognized corporate brands that may carry headline or reputational risk for major loss events, as illustrated by the ongoing COVID-19 business interruption claims reporting. To date, multiple lawsuits in multiple jurisdictions have been dismissed or, at best, continued, confirming the firm’s risk management expertise in underwriting its risks and containing its actual risks well within its risk tolerance.
The stable outlook reflects AM Best’s expectation that FM Global’s risk-adjusted capitalization and operating performance will continue to show generally excellent trends. AM Best believes FM Global’s management’s ERM practices will continue to generate correspondingly strong returns in its niche business model. The Group’s high risk tolerance regularly results in volatile underwriting performance from catastrophic events, which management has successfully managed throughout the organisation’s long history. Negative rating action could occur if operational performance deteriorates significantly compared to its strong rating. Negative rating action could also occur if risk-adjusted capitalization is significantly weakened by deteriorating non-catastrophe insurance trends or following a prolonged downturn in the stock market.
A+ (Superior) FSR and “aa” (Superior) long-term ICRs were affirmed with a stable outlook for Factory Mutual Insurance Company and its following subsidiaries:
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Appalachian Insurance Company
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Affiliated FM Insurance Company
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FM insurance company with limited liability
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FM Insurance Europe SA
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