AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of Caribbean Alliance Insurance Company Limited (CAIC) (Antigua and Barbuda). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect CAIC’s balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.

The balance sheet strength remains strongest based on solid capital and surplus levels and supported by favorable operating results. Risk-adjusted capitalization was assessed as strongest, as measured by Best’s Capital Adequacy Ratio (BCAR), and it has strengthened over the past five years as earnings growth has led to higher capital and surplus level amid sizeable stockholder’s dividends. This reflects the company’s ability to ensure that capital and liquidity are maintained at appropriate levels. Balance sheet strength is supported further by a highly liquid and conservative investment portfolio predominantly composed of short-term deposits in various currencies and no exposure to higher risk assets. Furthermore, CAIC has a comprehensive reinsurance program that is structured to protect earnings and surplus in the event of a natural catastrophe. The level of reinsurance protection remains higher compared with Caribbean insurance peers. Partially offsetting is the level of dependence on reinsurance contacts to cover various levels of losses; however, the reinsurance panels are diversified and of excellent credit quality with no history of disputes.

CAIC continues to exhibit strong operating results, which reflect solid underwriting income growth over the past five years, with 2021 net results outperforming profitability in the previous year. Underwriting gains were driven mostly by higher ceded commissions, which increased during 2021. These gains are reflected in CAIC’s profitability measures, with combined ratios and return on revenue reaching 81% and 14%, respectively. Other factors in the positive results include a low occurrence of losses as well as management’s conservative approach to underwriting. More recently in 2022, CAIC saw lower underwriting margins in its motor book of business due predominantly to the higher cost of auto repairs. To address this, CAIC is implementing appropriate rate actions and reviewing its risk selections.

AM Best views CAIC’s business profile as neutral. The company provides a wide range of insurance products in the Eastern Caribbean, primarily personal and commercial property and auto, as well as employees’ liability and general liability. The company holds a top five market share in 11 of its 16 territories, and benefits from its name recognition and solid reputation built over many years. However, the company remains exposed to regulatory risk in the territories in which it operates in, as well as multiple competitors in the region.

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