AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of National Grid Insurance Company (Isle of Man) Limited (NGICL), 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 categorises as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.

NGICL’s balance sheet strength is underpinned by risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best expects NGICL’s prospective risk-adjusted capitalisation to remain at the strongest level, underpinned by the captive’s low underwriting leverage and comprehensive reinsurance programme.

NGICL has a track record of strong underwriting performance, as evidenced by a five-year (2014-2018) weighted average combined ratio of 45%. Prospective operating performance remains subject to volatility, due to the captive’s exposure to low frequency, high severity losses in its property damage and business interruption account. However, the impact of large losses on the captive’s balance sheet is mitigated partly by extensive reinsurance protection.

NGICL’s neutral business profile assessment reflects its core role in NG’s risk management strategy as its principal captive. It is well-integrated into NG’s overall risk management framework, and its primary objective is to mitigate the NG group’s European financial exposure to casualty, cyber, property damage and business interruption risks.