AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” (Good) of Irwell Insurance Company Limited (Irwell) (United Kingdom). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Irwell’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
Irwell’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), at financial year-end 31 March 2023 (FY23). AM Best expects Irwell’s risk-adjusted capitalisation to remain at the strongest level with internal capital generation supporting future growth. The assessment considers Irwell’s high-quality asset base and very strong liquidity position, highlighted by liquid assets covering net technical reserves by 184.3% at FY23. The assessment also factors in Irwell’s moderate dependence on reinsurance to write new risks with high gross limits relative to its capital base. In addition, the company’s capital base remains relatively small (capital and surplus of GBP 32.2 million at FY23), which exposes its risk-adjusted capitalisation to potential volatility.
Irwell has a track record of positive, albeit volatile, operating performance, reporting a five-year (FY19-23) weighted average return on equity of 11.8%. Underwriting profits are the main driver of earnings, with the company reporting a five-year weighted average combined ratio of 85.6%. The close relationship with the Peninsula Business Services Group Ltd (PBSG), a group of service companies that distribute its products and is owned ultimately by Irwell’s shareholders, enables Irwell to adapt its profitability through pricing and commission arrangements. In 2021, Irwell commenced offering liability products to the intermediary market, to diversify its income and leverage on the expertise of its management team. The performance of the new products has so far been good, supported by Irwell’s cautious underwriting approach and good quality reinsurance structure in place. Operating earnings have been supplemented by modest but relatively volatile investment results over the past five years, reflecting the company’s conservative but small asset base and challenging economic conditions over the period.
Irwell benefits from a niche position as a provider of legal expenses and general liability insurance to clients of companies operating within PBSG, which provides advice on human resources, tax investigation and health and safety services in the United Kingdom (UK). Irwell’s specialist focus exposes the company to legislative changes related to UK employment and tax laws. AM Best expects the company’s portfolio to grow over the medium term, supported by the development of existing and new client segments and wider product offering.
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