AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of National Grid Insurance Company (Isle of Man) Limited (NGICL or the captive), a captive insurer of National Grid plc (NG). The outlook of these Credit Ratings (ratings) is stable.

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

NGICL’s balance sheet strength is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best expects the captive’s BCAR scores to remain comfortably above the minimum required for the strongest assessment, reflecting its strategy to maintain sufficient capital buffers to absorb potential volatility stemming from its exposure to low frequency, high severity losses. The assessment also reflects the captive’s conservative investment portfolio, which has been derisked in recent years. A partially offsetting balance sheet factor is the captive’s reinsurance dependence, driven by the large policy limits needed by NG. Counterparty credit risk is mitigated partly by the good credit quality of NGICL’s reinsurance panel.

NGICL has a track record of adequate operating performance, generating a 10-year (2015-2024) weighted average return on equity of just over 5%. Results over the cycle have been underpinned by good underwriting performance, albeit subject to considerable volatility, as demonstrated by significant losses reported on its property damage business interruption (PDBI) book in financial years 2021 and 2022. Nonetheless, the captive reported a healthy five-year (2020-2024) weighted average combined ratio of 75%. Prospectively, AM Best expects the captive’s underwriting performance to be favourable over the longer term, albeit subject to potential volatility given its high net line sizes relative to its premium base.

NGICL’s business profile assessment reflects its key role in supporting NG’s risk management strategy as its principal captive. The captive is well-integrated into the group’s overall risk management framework, providing a broad range of primarily PDBI, casualty and cyber cover to meet NG’s insurance needs.

AM Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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