A.M. Best has affirmed the financial strength ratings of A (Excellent) and the issuer credit ratings of "a+" of BNY Trade Insurance, Ltd. (BNY Trade) (Hamilton, Bermuda) and The Hamilton Insurance Corp. (Hamilton) (New York, NY). The outlook for all ratings is stable.

The rating actions on BNY Trade and Hamilton reflect each company's strong capitalization, consistently excellent operating performance, solid liquidity and conservative operating strategy.

Partially offsetting these positive rating factors are the companies' limited market scope, business profile and product mix, as well as its dependence on third parties for processing, servicing and administration. Somewhat offsetting these positive rating factors are the companies' relatively large (gross) underwriting exposure, as they offer high-gross insurance limits and insure bankers' professional liabilities and excess all risk property with substantial insured values.

Additionally, the ratings recognize BNY Trade and Hamilton's robust enterprise risk management (ERM) frameworks, as they follow the ERM practices of their ultimate parent, The Bank of New York Mellon Corporation's (BNY Mellon)(NYSE:BK), a leading global financial services company. The ratings also recognize the companies' excellent business position, as a result of their close ties to BNY Mellon.

BNY Trade and Hamilton provide comprehensive reinsurance coverage and products to their parent, BNY Mellon. The companies' reinsurance businesses have been placed with the world's significant providers. BNY Trade and Hamilton benefit from BNY Mellon's significant financial resources, extensive risk mitigation and safety programs, which have been implemented throughout the organization.

As the companies fully cede assumed risks to the commercial market, their exposure to net underwriting losses is minimal. Furthermore, the associated credit risk is limited through the use of highly rated reinsurers. The companies' projected operating results indicate favorable returns, and their aggregate surplus base of more than $1.4 billion is more than adequate to support their asset and credit risk exposures. While BNY Trade's excess bankers' professional program and Hamilton's excess all-risk cash and securities and property coverages written offer significant insured values (considering the high coverage limits offered), the net impact 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 BNY Trade and Hamilton. Also, A.M. Best recognizes the low probability of such events, and the companies' prospective risk-adjusted capitalizations are likely to remain strong.

Upward rating movement for BNY Trade and Hamilton is unlikely over the near to medium term. Nonetheless, the potential for negative rating actions could result if volatility in operating performance at either company 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 BNY Trade and Hamilton's ratings.

A.M. Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated in the United States and 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.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilized:
  • Alternative Risk Transfer (ART)
  • Catastrophe Analysis in A.M. Best Ratings
  • Evaluating Non-Insurance Ultimate Parents
  • Evaluating Country Risk
  • Risk Management and the Rating Process for Insurance Companies
  • The Treatment of Terrorism Risk in the Rating Evaluation
  • Understanding BCAR for Property/Casualty Insurers
  • Understanding Universal BCAR

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

Copyright Business Wire 2010