A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and issuer credit rating of “a+” of The Hamilton Insurance Corp. (Hamilton) (New York, NY). The outlook for both ratings is stable. The ratings reflect Hamilton’s excellent risk-adjusted capitalization, strong liquidity and conservative operating strategy. Also inuring to Hamilton’s ratings is the incorporation of a favorable business plan, which upon the profitability and liquidity metrics of the ratings is based. Partially offsetting these positive ratings factors is Hamilton’s short operating history, limited market scope/business profile, product mix and dependence on third parties for processing, servicing and administration. Somewhat offsetting these positive rating factors is the company’s relatively large (gross) underwriting exposure as it offers high gross insurance limits and execution risks associated with the implementation of Hamilton’s business plan. Additionally, the ratings recognize Hamilton’s excellent business position and its relationship with its parent, The Bank of New York Mellon Corporation (BNY Mellon) (NYSE: BK), a leading global financial services company. Hamilton provides comprehensive reinsurance coverages/products to BNY Mellon. Hamilton benefits from BNY Mellon’s robust enterprise risk management (ERM) framework as it follows ERM practices, financial resources, risk mitigation and safety programs implemented throughout the organization. Hamilton’s projected operating results indicate favorable returns, and its surplus base of over $1.3 billion is adequate to support its asset and credit risk exposures. While the excess all risk cash and securities program and the property coverages written offer significant insured values (considering the high coverage limits offered), the net impact of the credit risk could be burdensome. Nonetheless, this is mitigated by the historical fact that BNY Mellon has not experienced significant claims for these coverages in the layers insured by Hamilton. Also, A.M. Best recognizes the low probability of such events. Nonetheless, A.M. Best will closely monitor quarterly performance of Hamilton against its stated operating plan. Hamilton's ratings and outlook are not expected to be upgraded within the next 12 months as its operating performance and capital position have already been considered in A.M. Best’s ratings process. Nonetheless, the potential for negative rating actions could result if volatility in operating performance exceeds A.M. Best's expectations and results in a significant prolonged decline in risk-adjusted capitalization. In addition, deterioration in the credit profile of BNY Mellon could impact Hamilton's ratings.
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