AM Best has assigned a financial strength rating of A- (Excellent) and a long-term issuer credit rating of “a-” (Excellent) to Bermudian-based Research Insurance Company Limited.

The outlook assigned to these credit ratings is stable.

RICL is a captive insurance company wholly owned by Battelle Memorial Institute, an Ohio-based non-profit corporation and provider of technology-based research, management, commercialisation and educational services to government and industry.

The ratings reflect RICL’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile, appropriate enterprise risk management and one notch of rating enhancement that it receives from its ultimate parent, BMI in Columbus, Ohio.

RICL’s level of risk-adjusted capitalisation, as measured by Best’s capital adequacy ratio, is assessed at the strongest level, where AM Best expects it to remain in future years.

The balance sheet strength assessment also considers the company’s low investment risk profile and organic surplus growth achieved over several years. These factors are offset somewhat by the high loss limit (relative to its surplus) that the captive offers the parent.

Overall, RICL’s operating performance has been profitable as demonstrated by its five-year average combined ratio and net return on revenue measures that exceed AM Best’s commercial composite.

The ratings agency said consistent operating profits are attributable to favourable underwriting results and, to a greater extent, solid investment income in each of the past five years which together have enabled the captive to grow surplus.

Further, RICL’s operating performance reflects the inherent benefits of being a captive insurer as it has minimal acquisition costs and administrative expenses, driving its very favourable expense ratio.

RICL’s business profile is limited, as it writes, mainly on a claims-made basis, products and errors and omissions, umbrella policies for general and employers’ liability, professional liability, property flood deductible buy-down and environmental impairment coverage for its parent and affiliated organisations.

AM Best said RICL is an integral component of BMI’s ERM programme as it provides specific insurance coverages to BMI, its subsidiaries and affiliates more efficiently than the traditional market. This strategic role and history in the BMI enterprise justify lift from the parent in the ratings as it indicates a committed level of implicit and explicit support as well as other inherent benefits the captive receives from BMI.

The stable outlooks reflect AM Best's expectations that RICL’s future operating performance will remain stable and strong, and that the earnings profile will support the company in continuing to provide underwriting coverage consistent with its capital and surplus position.

It also reflects AM Best’s expectation that BMI’s support for the captive will not change.

Negative rating action could occur if underwriting performance declines and demonstrates volatility, negatively impacting earnings and capitalisation or if there is a material shift in risk profile that could undermine the stability and profitability of the company. Negative rating action could also occur if AM Best’s perception of BMI’s ability or willingness to support RICL changes.