Local insurance group The Colonial Group has had its financial strength rating of A- (Excellent) affirmed by ratings agency A.M. Best.

A.M. Best also has affirmed the stand-alone FSRs of A- (Excellent) of the Security & General Insurance Co. Ltd. (S&G) and of the British Caymanian Insurance Co. Ltd. (BCIC). The outlook for all ratings is stable.

Best said the rating of the Colonial Group, which has operations in Bermuda, the Bahamas and the Cayman Island, reflected its favourable risk-adjusted capitalisation, excellent liquidity and expanding geographic profile.

"The Colonial Group has a strong presence in the Bermudian property/casualty and health market (equalling over 35 percent of the group's total premium), as well as in the Bahamian market, where its subsidiary, Atlantic Medical Insurance Co. Ltd., is the leading medical insurer," Best said.

"Partially offsetting the positive rating factors are the Colonial Group's historically sporadic operating returns, fluctuating investment performance and its continued exposure to severe catastrophe losses inherent within the markets it serves.

"The rating of S&G reflects its conservative underwriting leverage, improved underwriting strategies, proven parental support, renewed balance sheet strength and solid operating performance.

"Partially offsetting these factors is S&G's business concentration, which exposes it to fluctuating market conditions as well as to frequent and severe storms."

Best said the BCIC's rating was based on its historically profitable underwriting results, conservative underwriting leverage and the explicit and implicit support it receives from its parent, the Colonial Group.

The rating also recognises its adequate level of capitalisation and earnings posture.

But it noted the company was dependent on reinsurance and the elevated investment leverage in equities, which historically weakened investment results and tempered BCIC's overall profitability and surplus growth.

"Furthermore, BCIC remains susceptible to both frequency and severity with respect to wind storms as evidenced by Hurricane Ivan in 2004," Best added.

The FSR of A- (Excellent) has been affirmed for Colonial Group and its following members: Atlantic Medical Insurance Ltd.; Colonial Life Assurance Co. Ltd.; Colonial Insurance Co. Ltd.; and — Colonial Medical Insurance Co. Ltd.