A.M. Best Co. has assigned a financial strength rating of B (fair)and an issuer credit rating of “bb+” to International Energy Insurance plc (IEI) (Nigeria). The outlook assigned to both ratings is stable. The ratings and outlook reflect IEI’s strong business profile within Nigeria, good expected financial performance and strong risk-adjusted capitalization. In A.M. Best’s opinion, IEI is well placed to achieve significant growth whilst retaining high renewals, owing to its standing in the market, sizable branch network and strong relationships with distributors has a diversified product offering, including motor, fire, accident, workmen’s compensation, marine and oil and gas insurance.

Whilst the company is a market leader in each of these classes of business, going forward it is positioning itself to grow its energy business as niche by taking advantage of recent government policy to grow the Nigerian insurance industry. The company’s strong capitalization means capital is not likely to be a limitation in the growth and maintenance of business. A.M. Best believes that IEI’s financial performance will continue to be strong, with combined ratios of around 85%, following IEI’s stable historical performance over the last three years. Reflecting IEI’s prudent underwriting approach, loss ratios are expected to remain low, though historical expense ratios have been somewhat higher than industry averages following IEI’s recruitment drive. However, the expense ratio is expected to improve over the next few years as the company grows its portfolio.

The bulk of the business written in the Nigerian market tends to be very short tail, with little scope for significant claims to be settled more than 18 months from commencement of coverage, and A.M. Best believes that this further reduces pricing risk and reserving uncertainty as well as earnings volatility. In line with the rest of the Nigerian insurance industry, IEI has gone through a recapitalization exercise in order to take full advantage of government policy aimed at increasing the participation of local insurers in the industry. In A.M. Best’s opinion, IEI is likely to maintain strong risk-adjusted capitalization during the next few years in order to position itself for new business growth.

A.M. Best believes that whilst current capitalization is strong, it needs to be monitored as the company pursues its growth strategy. However, given the prevailing economic climate, A.M. Best believes that business growth is more likely to be gradual. In addition, IEI’s new business growth is expected to emerge from the oil and gas sector, which is likely to expand gradually over the next two to three years. For Best’s Credit Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings .The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology