AM Best has upgraded the Financial Strength Rating to 'B++' (Good) from 'B+' (Good) and the Long-Term Issuer Credit Rating to 'bbb' (Good) from 'bbb-' (Good) of Bahrain-based FAIR Oil & Energy Insurance Syndicate (FOEIS) with a 'Stable' credit rating outlook for both.
The ratings reflect the Syndicate’s balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.
The rating upgrades reflect the steady enhancements over recent years made by the Syndicate to improve its balance sheet strength fundamentals, notably through increased risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR). These were achieved in part by robust capital generation, in addition to the de-risking and diversification of its investment portfolio and retrocession panel. In addition, the Syndicate has taken steps to strengthen the permanence of its capital, achieved through the annual retention of surplus and regular transfer of retained earnings to its general reserve which may not be distributed to members.
The Syndicate’s underwriting performance has been consistently profitable. Preliminary results for 2024 show continued positive earnings, with a net surplus of $4.3m, equivalent to a return on equity of 10%.
The Syndicate is one of four reinsurance vehicles formed by the Federation of Afro-Asian Insurers and Reinsurers (FAIR), with a remit to underwrite energy business. FOEIS’s members are drawn from participants of FAIR, who subscribe to the Syndicate’s units of capacity. As at year-end 2024, the Syndicate consisted of 20 members from across the Africa, Middle East and Asia regions. Whilst unique in its legal structure, the Syndicate operates like a traditional reinsurer, providing capacity and expertise to its members as well as third-party cedants.
The Syndicate benefits from a niche business profile, having built a good reputation within the energy insurance market. Whilst FOEIS is concentrated by line of business, the Syndicate benefits from diversification through the geographical spread of its portfolio. FOEIS’s stable member base provides it with good access to energy risks across the Afro-Asian territories, supplemented by business written on the open market across the region.