An upgrade in outlook from stable to positive has been given to Bermuda-based Lancashire Insurance Company Limited, along with Lancashire Insurance Company (UK) Limited by ratings agency AM Best, which also affirmed the issuer credit rating (ICR) of ‘a’ of both companies.Additionally, the financial strength rating (FSR) of A (excellent) of Lancashire (the name by which the companies are collectively known) was affirmed by Best, who said their outlook is stable.And AM Best has revised the outlook of Lancashire Holdings Limited (Lancashire Holdings) (Hamilton, Bermuda) to positive from stable and affirmed the ICR of ‘bbb’ and debt ratings of the parent company.AM Best stated in a press release yesterday: “The ratings reflect Lancashire’s excellent risk-adjusted capitalisation, very strong operating results since inception, experienced management team and the financial flexibility afforded to the group by the listing of Lancashire Holdings’ shares on the London Stock Exchange.“Additionally, the ratings reflect the group’s strong enterprise risk management (ERM) framework, which has mandated its conservative operating strategies. This customised ERM framework has produced excellent underwriting results, which has enabled Lancashire to consistently generate return measures at the high end of its peer group. Lancashire’s success is attributable to its adhering to and executing on its initial business plan.“Partially offsetting these positive attributes is the company’s exposure to low frequency, high severity events due to its targeted lines of business,” stated the ratings agency.The press release explained that Lancashire’s operating activities focus on a specialist approach to writing core accounts, as well as targeting dislocated classes of business. The company’s operations include a diversified mix of business, both geographically and by class, including direct short-tail property insurance and reinsurance, energy and terrorism, as well as a small portfolio of third-party AV52 aviation liability and marine risks, including hull and protection and indemnity coverage.“Factors that could lead to rating upgrades would be the continuation of Lancashire’s long-term, consistently strong operating profitability and maintaining excellent risk-adjusted capital levels commensurate with its ratings. The rating factors that could lead to a negative outlook or rating downgrades include unfavourable operating profitability trends, outsize insurance or investment losses and a significant decline in the company’s risk-adjusted capital that would not be supportive of its current rating level,” it said.Best also affirmed debt ratings of ‘bbb’ on $130 million or 5.7 percent senior unsecured notes, which are due in 2022, and ‘bbb-’ on $130.8 million 3.7 percent subordinated notes, due 2035.