LONDON–(BUSINESS WIRE)–AM Best affirmed Irwell Insurance Company Limited (Irwell) (UK)’s financial strength rating of B++ (good) and long-term issuer credit rating of ‘bbb’ (good). The outlook for these Credit Ratings (ratings) is stable.
The ratings reflect the strength of Irwell’s balance sheet, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate management of business risks.
Irwell’s balance sheet strength assessment is supported by its highest level risk-adjusted capitalization, as measured by the Best Capital Adequacy Ratio (BCAR), at the end of the financial year of March 31, 2022 (FY22). AM Best expects Irwell’s risk-adjusted capitalization to remain at the highest level, with internal capital generation supporting future growth. The valuation takes into account Irwell’s high quality asset base and very strong liquidity position, evidenced by liquid assets covering net technical reserves by 180% in FY22. also reflect Irwell’s moderate reliance on reinsurance to underwrite new risks with high gross limits relative to its capital base. In addition, the company’s capital base is relatively small (capital and surplus of £29 million in FY22), which exposes its risk-adjusted capitalization to potential volatility.
Irwell has a track record of adequate, albeit volatile, operating performance, demonstrated by a five-year (fiscal years 2018 to 22) weighted average return on equity of 13%. Underwriting earnings are the main driver of earnings, with the company posting a five-year weighted average combined ratio of 88%. Irwell’s close relationship with the Peninsula Business Services Group Ltd (PBSG), a group of service companies which distribute its products and which is ultimately owned by Irwell shareholders, strengthens its ability to control profitability through agreements pricing and commission. In 2021, Irwell also began offering its products to the middle market, in order to diversify its revenue and build on the expertise of its management team. The performance of the new products should be supported by Irwell’s conservative underwriting approach and the good quality reinsurance structure in place, which protects earnings against material limit losses. Historically, operating profits have been supplemented by modest but relatively stable investment results, reflecting the company’s conservative investment portfolio.
Irwell enjoys a niche position as a provider of legal protection and general liability insurance for clients of companies operating within PBSG who provide advice on human resources, tax investigations and health services and security in the United Kingdom (UK). Due to its specialist focus, Irwell is significantly exposed to legislative changes relating 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 customer segments.
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