AM Best has affirmed the financial strength rating of A (excellent) and the long-term issuer credit rating of “a” (excellent) of Utah-domiciled NiSource Insurance Corporation (NICI). The outlook for the ratings is stable.
NICI is a single parent captive owned by US utilities company, NiSource, providing all-risk property, workers’ compensation, excess general and automobile liability, medical stop-loss, long-term disability, group life insurance and punitive damage coverage for the parent and its affiliates.
AM Best said it has taken a balanced view of NICI’s overall business profile, which maintains advantages as a single parent captive with immediate access to resources along with the broader financial wherewithal of its ultimate parent.
The ratings agency said NICI plays a “critical role” in NiSource’s overall enterprise risk management (ERM) framework, supporting its objectives through insuring key risks of the parent.
The ratings reflect NICI’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate ERM.
NICI maintains the strongest level of risk-adjusted capitalisation, as measured by Best’s capital adequacy ratio (BCAR).
A conservative reserving philosophy is evident through the company’s reported favourable reserves development in each of the past 10 years.
The balance sheet assessment also considers the company’s ample liquidity measures, and maintaining low underwriting leverage, in addition to having no debt.
The stable outlooks for NICI reflect the company’s sustained profitability, adherence to maintaining capital at the appropriate risk-adjusted levels and its measured and prudent approach in insuring its parent’s exposure.
Positive rating action may occur due to a sustained trend of improvement in the company’s overall balance sheet strength that supports a higher assessment level.
“Conversely, negative rating actions could occur from a decline in the company’s operating performance, an increase in underwriting leverage or an outsized loss event that triggers a sudden decline in risk-adjust capitalisation,” AM Best said.
“In addition, negative rating action could occur due to financial issues resulting in rating pressure on the ultimate parent that could impact NiSource’s ratings.”