A.M. Best gives ‘A’ strength rating to Arch Insurance Company (Canada)

A.M. Best Co. has upgraded the financial strength rating of Arch Reinsurance Ltd. (Arch) (Bermuda) and its reinsured affiliates, including Arch Insurance Company (Canada), the only Canadian-licensed Arch entity, to A from A-.
The outlook on the rating is stable.
A.M. Best noted the upgrade in the rating of Arch Reinsurance Ltd. (Bermuda), which provides explicit support to Arch Europe in the form of an 85% quota share, benefited the rating of Arch Europe.
“Arch Europe is likely to maintain excellent, stand-alone, risk-adjusted capitalization, supporting the initial growth phase of the company which is likely to stabilize during 2007-08,” A.M. Best reported.
The press release says the importance of Arch Europe to its ultimate parent company, Arch Capital Group Limited, is indicated by a quota share arrangement with Arch Reinsurance Limited, which was increased to 85% from 60% in January 2006.
A.M. Best anticipates that Arch Europe’s future performance will be good, supported by the commitment of its management to moderate business volumes when opportunities in the market are scarce.
The press release continues to state that the underwriting performance in 2006 is expected to be strong, despite a likely increase in the company’s combined ratio to approximately 95% up from 77% in 2005.Temporary fluctuation in Arch’s expense ratio in its early growth phase is the likely cause for the increase in its COR, and is further exacerbated by the increase in the percentage of premium ceded under the quota share agreement with Arch Reinsurance Limited, A.M. Best says.